Contractors and Risk: Better Cover Up

Are you renovating one of your apartment units or contemplating a bigger project? If the answer is yes and you intend to hire a contractor, you may need to know a few basics about insurance.

Construction work and maintenance projects large and small have at least one oddity in common: in either instance, someone can get hurt. You don’t need a $1 million renovation project for someone to trip and fall. If the door is open, you might say, the invitation for risk is also open.

When you call in the contractors, it might go without saying that you want a company with adequate insurance. Presumably, you know enough to have liability covered for your own business, but now that you are in the position to hire someone else, what insurance do they need?

Of course, the Internet is a great place to research options. There are tons of articles and posts out there that have information regarding general liability, contractor bonds and many other policies. This number of policies also illustrates the number of risks that are out there. Insurance companies study those risks and calculate the potential damages to create these policies and cover a variety of problems. It’s very easy to get confused by all of the technical names and coverage options (that aren’t actually “options” in the truest sense of the word). To help you out, here is a breakdown of the most common types of insurance.

General Liability

Econtractors Insurance defines its General Liability Insurance as insurance that is “paid on behalf of an insured party to render services and compensate for negligence according to a law or contract.” As the term suggests, it is a broadly defined category that covers items that involve lawsuits filed against you.

General liability can apply to businesses that move from location to location – contracted building work, not to put too fine a point on it. It can cover premise liability, product liability and completed operations liability. The first, premises liability, as it implies, covers monetary loss that results from a condition of the premises or property or from the construction work, even if that construction work is not on site – someone building a roofing truss at another location, for example.

Product liability covers a product’s liability after it is sold – a manufacturing flaw after point of sale that injures a user would fall into this category.

Completed operations liability is not exactly what it sounds like. It is not coverage that guarantees work will be completed. It is a policy that covers liability issues that arise after a project is completed. That is, after the contractor has split the scene, the work, nonetheless, ends up causing a monetary loss to someone through personal or property damages.

Contractor Bond or Surety Bond

This is the coverage that concerns project completion. Any failure to meet the obligations of a contract are covered with this type of insurance.

Needless to say, you’ve heard the stories. Contractors, for dozens of reasons, fail to complete a job. They argue about the specifics of a contract or simply go out of business midway through a project. This coverage takes care of those losses.

Workers Compensation

For some, this is the best health insurance available – 100 percent coverage if you are hurt on a job. It’s a hard deal to pass up and illegal to pass up, as well. All states have some form of workman’s compensation requirement.

Builders coverage

A building project exposes a property to risk. Before construction is done, walls are exposed, equipment and materials are open to the elements, at risk of vandalism, damage from heavy rain, floods, snow and other natural forces. Building coverage insures against these losses.

Equipment coverage

What if a boiler malfunctions? What if a bobcat or a crane causes damages at a construction site? This coverage handles those contingencies.

Pollution insurance

At a glance, pollution insurance would appear to cover the environmental impact of a project, and it does, by definition. But this is mostly used as hazardous material insurance. If a worker or a passerby is injured by reactions to on-site chemicals – everything from cleaning solutions to asbestos.

Errors and Omissions

What if a contractor finishes the job, packs up and leaves, but somehow overlooked or did not compete part of the project. Any number of risks are associated with this type of liability that could result in financial damages.

Home inspector

That’s right: The job is halfway done and the inspector shows up. But the inspector fails to notice something that is needed to bring the wiring or the plumbing or the structure up to code. Oops.

Engineering and Architecture

These items are also covered with insurance policies. This type of policy may apply to the work you are having done.