There is always a certain level of risk involved in any construction project, whether it’s new home construction or a simple home renovation. However, choosing an uninsured contractor is a risk you should never take.
Here at GreatBuildz, a free service that personally matches homeowners in Los Angeles, Orange County, Ventura & San Diego with reliable, licensed, and insured contractors, we talk to homeowners every day about the importance of hiring only insured contractors – here are some key points to know.
When a contractor takes on a construction project, he or she is also taking on a lot of liability. Therefore contractors need insurance — to cover themselves and their employees in the event of an accident or incident on the job site. In fact, the issue of insurance is so critical that most states refuse to issue a contractor’s license to anyone who does not carry the required amount of insurance worker’s compensation and general liability insurance.
This is how to check if a contractor has insurance in California:
- You can go to the CSLB website to determine if the contractor is bonded and insured with Workers Compensation insurance.
- But, to make sure you are working with a fully insured contractor, you will also need to get a copy of their General Liability insurance policy. You can get proof of insurance from the contractor directly or their insurance agent. Make sure the policy is up to date.
Why You Should Only Work with Licensed Contractors
As the homeowner, it is in your best interest to only work with licensed, bonded, and insured contractors. Doing the opposite could result in financial repercussions if the project does not go as planned or someone is injured on the job.
Remember that a lot of things can go wrong on a construction site. And when you choose an unlicensed or uninsured contractor, you could end up bearing some financial liabilities of your construction project. If the workmanship is subpar or causes damage to your property or if a crew person gets injured, you may have to pay for this out-of-pocket.
3 Insurance Policies Your Contractor Must Have
Before hiring any contractor, ask for their proof of insurance coverage first. For added measure, you may want to contact the insurance agency yourself to confirm that the coverage is up-to-date, valid, and will remain so for the duration of your engagement.
The following are the insurance coverage you should look for in a contractor:
1. Workers Compensation Insurance
Workers’ compensation insurance is a must-have for any California contractor. You could be stuck paying the medical bills of an injured employee if you hire a contractor without workers’ compensation insurance to renovate your property.
On the job site, contractors and their workers are at risk of getting injured while working on your project. And while you may think that an injured worker is not your responsibility, that is not always the case. For those contractors without workers’ compensation insurance, the claim may go to the prime contractor, which in most states is the project owner.
The medical bills and lost wages that they accrue while they are unable to work could fall on you, and your homeowners’ insurance may not protect you from this financial burden.
2. General Liability Insurance
Before hiring a contractor, check to see if he or she is properly insured against general liability. Aside from physical injury, accidental property damage is also common on the construction site. When this happens, the affected party may seek compensation for the losses from the Contractor’s General Liability Insurance policy.
Say, for example, one of the crew accidentally hits your neighbor’s fence during the process of your home renovation. If the contractor carries general liability insurance, the claim could be made against their policy. But if they don’t have any, you could be held responsible for the damage if the contractor refuses to make the repair.
In addition to general liability, make sure your contractor’s insurance policy also covers products and completed operations. This not only shields you from lawsuits resulting from the harm contractors inflict on third parties, but it also allows you to collect if their work turns out to be subpar and causes you harm in the future.
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3. Auto Liability Insurance
Homeowners and businesses often overlook auto liability insurance when hiring contractors for renovation or construction, but this is important if your project requires the support fleet of trucks and other vehicles.
Auto liability insurance includes loading and unloading coverage, which will cover accidents that occur while they’re loading or unloading materials on your property.
This policy may not be necessary for small-scale projects with little transportation involved. To determine if you should require auto liability coverage from your contractor, review your specific project requirements or speak to your insurance agent.
The Risks of Hiring an Uninsured Contractor
Contractors insurance is the buffer that will safeguard your personal and financial interests, should the unthinkable happen. These reasons should be enough to convince you not to work with uninsured contractors:
1. Uninsured contractors are a threat to your financial affairs.
When working with uninsured contractors, you run the risk of financial responsibility if an accident occurs, or your property is damaged. While hiring an uninsured contractor may allow you to save money in the short term, the long-term risk they expose you to may hurt your finances badly.
2. They may not have the means to pay you in case of property damage.
It is possible that uninsured contractors will not be able to pay you back for any damages to your property, so you will be on the hook for the full cost of repairs. If you’re renovating for business on a leased property, you may be required to use a licensed, bonded, and insured contractor to complete any work. Any damage to the property because of your contractor’s negligence could end up becoming your liability.
3. Your homeowners’ property insurance policy may not cover losses caused by an uninsured contractor.
If you’re under the impression that your uninsured contractor-related losses will be covered by your home insurance or property insurance policy, it may not. In the event that a crew is injured on your property and requires a lengthy hospital stay, different insurance scenarios will ensue, depending on your specific homeowners’ insurance policy.
If the contractor is licensed, bonded, and insured, then their workers’ compensation policy will apply. If not, the liability may fall under your insurance policy or you will have to pay for the medical bills and compensate for lost wages out of pocket.
Before you even start researching a home renovation project, you should review your homeowners’ insurance policy carefully. If reading all the fine print and legal jargon in your policy paperwork is too daunting, just call your insurance agent and ask what your policy covers.
4. It’s simply not worth the risk.
You effectively become the general contractor in the eyes of the law if you hire an uninsured contractor. So even if you’re tempted to hire an unlicensed contractor to save time or money, just don’t do it.
Working with a licensed, bonded, and insured California contractor that can provide proof of insurance ensures that you will not be financially harmed if something goes wrong during the construction process. Hire a fully insured contractor who has all of their bases covered in terms of insurance coverage. In the long run, you will save time, money, and stress.
How do I find a licensed, bonded, and insured contractor near me?
When it comes to finding a reputable construction contractor in your area, you shouldn’t have to go it alone – GreatBuildz can help simplify your contractor search. GreatBuildz is a free service that connects homeowners in Los Angeles, Orange County, Ventura & San Diego with reliable, thoroughly screened general contractors and provides project support from start to finish.
Call now (818.317.3567) to chat with our local team about your next renovation project or visit our website for more information: www.greatbuildz.com