Your signed agreement with your contractor should require him to provide general liability and workers compensation insurance. To verify your contractor has the proper insurance, ask to see a certificate of insurance that lists the contractor’s insurance policies, their effective dates, and limits of liability. You should be named as the certificate holder on the front of the document. Once you receive the certificate from your contractor, review it to ensure the proper insurance coverages are in place and then keep the certificate in a safe place.
The liability insurance carried by your contractor is similar to the personal liability insurance that’s part of your home insurance policy, but is geared towards business use. Just as your home insurance policy will not cover you for your business liability, you should not accept a contractor’s home insurance policy as adequate coverage for his business operations. Instead, the contractor should maintain a Commercial General Liability insurance policy in the name of his business and it will need to be referenced on the certificate of insurance.
In addition to carrying general liability insurance, you should require your contractor to make you an additional insured on his policy. This way, if you are exposed to any third party liability claims arising out of the contractor’s work, you have the benefit of his policy in addition to your own policy. For example, if in the process of working on your home’s construction the contractor causes some damage to your neighbor’s home, the neighbor would likely file a liability a claim against both you and your contractor. Obviously, if it wasn’t for the contractor’s activity, you would not have been brought into the claim. As an additional insured on your contractor’s policy, you can report this claim to your contractor’s liability policy and request that they handle the claim on your behalf without involving your personal liability policy. Otherwise, you would have to handle the claim yourself.
Your contractor should also maintain workers compensation insurance covering all of his employees. All states have labor laws that require employers to provide adequate workers compensation insurance when they have employees working on their behalf. It’s not uncommon for smaller contractors to try and find a way around this requirement due to the cost. However, you should be insistent that your contractor follow the law and provide the requisite insurance. This way, if any of the contractor’s employees are hurt on the job, there will be insurance in place to take care of them. Evidence of the workers compensation insurance should also be listed on the certificate of insurance.
After the project has been completed, you should continue to keep the certificate of insurance in a safe place. If the work subsequently fails or causes damage to other parts of your home, you may have a valid liability claim against your contractor. Knowing he has the proper insurance and who the insurance company is can make your claim filing process much simpler regardless of the state you reside in- Iowa, Idaho, Indiana, Maryland, Massachusetts.