North Carolina Personal & Business Insurance
Durfey-Hoover-Bowden Insurance Protecting Your Way of Life Since 1937

Contractors and Homeowners Insurance

| March 2014

If you hire an electrician and his faulty work burns down your home, who is going to pay?

If his worker is injured on your premises, who will pay his lost wages?

If they don't have insurance, the answer could be you.

Hiring a contractor can be very expensive. It can be tempting to go with the cheapest option available. One of ways contractors can cut their prices is to not purchase insurance. This puts you at risk. You often hear contractors claim that they are "insured and bonded", but even this doesn't tell you much. It could just mean that their auto is insured while driving to your home and they are bonded to work on a street somewhere. Your homeowners policy provides some liability coverage, but you should still use a contractor with their own insurance.

Ask your prospective contractor to provide a Certificate of Insurance. They can request their insurance agent to send you one. A Certificate is far from a perfect document, but it is a quick way to see the basics. If you are having major work done on your home, this isn't a bad idea.

There are a few things to look for:

Coverages on Certificate of Liability Insurance

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Current Dates

Start by looking to see that the coverage is current. An old certificate only tells you that they had insurance in the past.

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General Liability Coverage

Provides coverage for bodily injury and property damage arising out of their operations. If "Products and Completed Operations" is not included, their coverage ends when their job ends. Problems arising out of their finished work will not be covered.

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Workers Compensation

  • This provides payment for medical expenses and lost wages if an employee is injured on the job.
  • In NC, Companies with three or more employees are required to carry workers compensation. A small contractor will often tell you that they don't need to have it. This just means they opted not to buy it. It is available. If a small company chooses not to buy Workers Comp, it is up to you if you still want to hire them.

Other Coverages

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Builders Risk

If you are building a new home or adding onto your home, this provides protection for the new construction and building materials while it is being built.

It is often purchased by the builder, but some contractors want the homeowner to buy it. You need to be clear who is responsible for this policy and get proof it has been purchased. This falls through the cracks most often when no bank financing is involved.

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Fidelity Bonds

The most common type of bond you could encounter provides protection if their employees steal from you. While better than nothing, actually getting paid from these bonds can be somewhat difficult.

The best option is to lock up or remove your valuables while contractors are in your home. You picked a contractor you trust, but he is probably not going to be the only one that comes on the job site.

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