While it’s true that life is a gamble, you should never risk what you can’t afford to lose. This principle holds weight in many different aspects of life, especially those that involve substantial risk – hiring a general contractor included.
Though it’s relatively cheaper, going for an uninsured contractor isn’t a good idea. When you bring a general contractor on-board for a construction or home remodeling project, he or she assumes responsibility for the build and just about everything else that happens on the job site. And with that enormous responsibility comes an equally massive liability.
Why you should only hire insured contractors
Whether it’s a commercial building or a residential renovation project, construction jobs can easily become the largest investment of your life. That said, you have to protect yourself from any issues that might arise after the work gets off ground. Part of effectively safeguarding your interests hinges on the credibility of the people you choose to hire.
Here are some reasons why you should only work with a fully licensed general contractor who has all the proper contractors insurance policies in place:
Uninsured contractors are major headaches waiting to happen as they expose you to financial risks in the event of an injury or property damage. And since they have no way of repaying or compensating you when problems and issues arise, the cost of the damages lies squarely on your shoulders.
Remember that a workplace accident can take place at any time and even the best construction crew can make mistakes. While a homeowners policy does cover property damages, it has its own set of limitations. Hiring insured contractors that carry both general liability and workers compensation insurance is the best way to protect yourself from these risks.
Sign of contractor credibility
A responsible general contractor takes care and invests in his reputation. Having both license and insurance shows that they care about the quality of their projects. Furthermore, it is a good indication that the contractor you hire is reliable and in it for the long haul.
Assurance on quality
License and insurance go hand in hand. This is because to obtain the former; you need to have the latter. Contractors with both are most likely to do a quality job the first time because builds that are not up to contract standards might cost them their license.
Savings on maintenance
Insured general contractors are more expensive upfront. However, investing in their professional services may result in long-term savings especially on maintenance.
Uninsured contractors are more prone to substandard jobs which may be expensive to correct later. Moreover, you will be obliged to cover for the cost of the repair or damage since the contractor you hire lacks or doesn’t have the insurance for it.
If you hire an unlicensed contractor on purpose and some kind of damage or accident occurs, your insurance company has the right to refuse the claim. As a result, you’ll have to pay for everything from your own pocket.
Aside from guaranteed property protection, hiring a licensed and insured contractor may have a direct effect on the value of your property. If you have had work done by an uninsured contractor and it was not up to code, you’ll have to disclose the information to potential homebuyers. Working with a licensed vendor has its advantages especially when you decide to sell in the future.
What insurance must a general contractor carry?
In most states, general contractors are required to carry at least two critical insurance policies: contractor’s liability insurance and worker’s compensation insurance.
It could be something as small as a crack on the floor tiles or as costly as flooding your house. No matter the scale or extent of the damage, you shouldn’t have to pay for something that isn’t your fault.
When you hire a contractor with valid liability insurance, you will be compensated for any damages on the property caused by the use of poor-quality materials or shoddy work. Liability insurance covers:
- Damage Claims –The insurance covers the cost of repair for damages caused by the contractor while doing work on your property.
- Injury Claims – The contractor’s liability insurance covers any court judgments and medical or funeral expenses should anyone get injured while on duty. This is different from workers’ compensation insurance.
- Job Completion Claims – In case the contractor fails to meet expected standards, the insurance will shoulder, in part or full, the cost of fixing the mistakes.
Worker’s compensation insurance
Let’s say one of the guys left a box of tools in the middle of the driveway. After a while, somebody trips on it and gets severely injured. Who’s going to pay the hospital bills?
The Worker’s compensation insurance policy protects the crew by providing wage compensation and medical assistance in case of on-site injuries. Employing a contractor with an active workers’ compensation insurance will save you from any financial liabilities in case someone gets hurt while working on your property.
Ultimately, hiring a general contractor who has all the necessary insurance coverage in place gives you peace of mind. You won’t have to worry too much because you know that even if something does go wrong with the project, you will be appropriately compensated and free from any liabilities.
Make sure your general contractor has insurance
Now that you’re fully aware of what kind of insurance coverages your general contractor has to carry, you need to do one more crucial thing: make sure it exists, and it’s valid! There’s nothing wrong with trusting people and what they say, but there’s too much of a risk involved here to simply take your contractor’s word for it.
If the general contractor you’re talking to is as reliable as he claims to be, he shouldn’t have any issues with showing you tangible proof of his insurance policies. Also, you have to be aware that liability and worker’s compensation insurance can be structured in plenty of different ways. That said, you have to make sure that your contractor has at least the minimum coverage required by the state.
Finally, wrap up your “homework” by contacting the insurance agency to verify that the policies are still and will be in effect throughout the schedule of the build.
A word to the wise
Construction site accidents are not new. They occur far too often without you knowing. The cheaper offers of uninsured general contractors can be tough to resist especially if you’re working with a tight budget.
But think about this: if your contractor doesn’t have insurance, who will cover the expenses if a part of your home gets damaged? If a worker accidentally punctures a water line, who will pay to clean up the mess and foot the repair bills? If a contractor can’t even be bothered to purchase insurance, do you think they will hold themselves accountable for any mishaps?
It doesn’t matter if they’re offering you a very tempting bargain. If you discover that the contractor you’re making a deal with is uninsured or has an uninsured crew, there’s no need to think about it. Get up and find yourself a new one that is both licensed and insured. With a reliable and reputable general contractor overseeing the job, you’ll sleep better at night.