Few homeowners ask to see their contractor's insurance. It's important to know what insurance covers during renovation.
Whether contracting renovation work or doing it yourself, it’s important to be fully covered through the process. An insurance agent can explain what a homeowner’s policy covers and what should be provided by a contractor. Here are the main things to make sure are covered going into a renovation.
A contractor or subcontractor should have liability insurance that covers the value of your home and possessions. Liability and worker’s comprehensive insurance will cover property damage, injuries onsite and negligence in workmanship. Ask to be named as “additionally insured” on a contractor or subcontractor policy and request a copy. Note that contractors include electricians and plumbers.
Consider whether a contractor or subcontractor’s policy limits are high enough to cover potential risks for bodily injury and property damage. Most contractor’s liability coverage hovers around $1 million.
Builder’s risk coverage is less essential than liability, but important in the event of theft or vandalism. Whereas liability insurance will only cover damage done to an existing building, builder’s risk covers damage done to and as a result of renovation work. For instance if a renovation to a new addition starts an electrical fire, builder’s risk would cover while liability would not.
In the event a contractor or subcontractor cannot fulfill a contract, a homeowner can get expenses covered to finish the job with surety bonds. Surety bonds are recommended if there are any doubts about a contractor’s financial standing or ability to execute their contracted duties.
Completed Operations Coverage
Depending on work performed, homeowners may want to obtain completed operations coverage. Completed operations covers homeowners from damage or injury that occurs after renovation work has concluded. For instance, if an electrician wires a new room and a year later a fire starts due to faulty work, the homeowner is covered.
Doing Renovations Yourself
Any homeowners that are doing renovations themselves should talk to their insurance broker first, as many big renovations may fall outside of a normal homeowner’s policy. Most homeowner’s policies should cover injuries during renovation. A homeowner can raise the limit of “no fault” protection so an injured party deals directly with an insurance company and will not sue the homeowner.