A home remodeling project is something most homeowners will tackle at some point. Regardless of the
magnitude of the upgrade, you can minimize your risk of financial loss by making sure the right
insurance is in place before and after the work takes place.
It’s easy to hope nothing is going to happen, but an incident is much more likely to occur during
construction. Failing to address this possibility beforehand can cost you hundreds of thousands of
dollars.
Before the remodel
The most important thing you want to do before you agree to hire a contractor is to make sure the
company has a contractor’s liability insurance policy in place. The minimum amount of coverage your
contractor should have is $1 million.
If the contractor has workers, then you should ask for a worker’s compensation policy, as well. In some
cases, the contractor will state that the workers are subcontractors and therefore not true employees,
so they don’t need worker’s compensation insurance.
However, the legal system may very well view these “subcontractors” as employees. As such, this can
put you at risk should an injury occur to any of these workers.
Here are the characteristics of true subcontractors:
- They have contractor’s licenses.
- They have their own insurance.
- They specialize in one type of contracting.
- They may have employees.
- They have their own vehicles and equipment.
If most of these characteristics are not present, then there is a good chance the legal system can deem
them as an employee of the general contractor. Again, this can put you at risk if the contractor does not
carry any worker’s comp insurance.
It’s worth paying more to hire the right contractor than have to deal with a contractor that doesn’t have
the right insurance in place.
A contractor without appropriate insurance rarely wants to admit this. This is why it’s important to ask
for a certificate of insurance for these policies directly from the contractor’s agent.
Make sure the dates are current or will at least offer coverage throughout the duration of your remodel
job. If the policy is going to expire in the middle of the project, be sure to get an updated certificate.
If you are using a Builders Risk policy to insure the house during renovations, be sure it includes uninstalled materials stored on the premises.
Discuss renovations with your agent before you begin.
After construction
Once construction is complete, you should review your homeowner’s policy coverage with us. The top
priority is to make sure your home is fully insured according to the new rebuilding value.
If you have done an interior remodel and not an expansion, you have likely increased the cost per
square footage.
If you have undertaken an expansion, then you need to account for your additional square footage. We
will do an updated replacement cost estimate, which will take into account the characteristics of your
rebuilt home.
This is extremely important, since you have invested tens of thousands of dollars upgrading your home.
You need to update your coverage to protect that investment.
