How Do Insurance Policies Work With A General Contractor?

A general contractor typically carries several types of insurance to protect themselves and their clients during a construction project. The key forms of coverage that are relevant to most projects are liability insurance, worker’s compensation, and property damage insurance. Each of these types serves a different purpose, and knowing how they work is important.

General Liability Insurance

This is the most common type of insurance a general contractor will carry. It covers any accidents or damages that might occur on the job site. For example, if a subcontractor accidentally damages your property, general liability insurance can cover the repair costs. It also covers third-party injuries, like if a visitor to the site is injured during the construction process.

Worker’s Compensation Insurance

Worker’s compensation insurance is designed to protect workers in case of injury or illness while on the job. If a contractor or any subcontractor gets hurt while working on your property, this insurance covers medical expenses and lost wages, preventing you from having to pay out-of-pocket for their injuries. Most states require contractors to carry this type of insurance to protect workers.

Property Damage Insurance

Property damage insurance protects the contractor’s equipment and materials on the job site. However, this doesn’t usually cover any damage to your property, which is where general liability insurance comes in. If your property is damaged due to the contractor’s actions, their general liability insurance should take care of the costs.

Why Do You Need to Verify a Contractor’s Insurance?

While it’s common for general contractors to carry insurance, not all policies are the same. As a homeowner, you should always verify that the contractor you’re hiring has proper coverage. This not only protects you in case something goes wrong during the project, but it also ensures that the contractor is a legitimate business. Working with an uninsured or underinsured contractor can lead to financial trouble if things don’t go according to plan.

Proof of Insurance

Before hiring a general contractor, ask them for proof of their insurance coverage. A reputable contractor should be more than happy to provide this documentation. If they hesitate or refuse, that’s a red flag. You can also call the insurance company to verify that the coverage is active and sufficient for the scope of the work being done.

Coverage Limits

Check the limits of the contractor’s insurance policy. For example, general liability insurance might cover up to $1 million in damages, but for larger projects, you might want to ensure the coverage is high enough to protect you fully. In some cases, you may also want to purchase additional insurance coverage to protect yourself further.

How Insurance Affects Your Contract

Insurance requirements should be outlined clearly in the contract between you and the contractor. The contract should specify that the contractor will carry general liability, worker’s compensation, and any other necessary forms of insurance. If the contractor doesn’t provide the necessary insurance, you may want to consider working with someone else. You can also ask the contractor to list you as an additional insured party on their policy, which ensures that you’ll be covered in the event of an incident.

Contract Clauses Related to Insurance

The contract may also outline how insurance claims are handled. For instance, it should state that the contractor is responsible for handling any damage or injury claims on the job site. It should also clarify whether your homeowner’s insurance will need to be involved in case of significant damage.

What Happens If an Insurance Claim is Filed?

If something goes wrong on the job site, and an insurance claim needs to be filed, the process can be straightforward as long as you and the contractor have the proper coverage in place. For example, if a subcontractor damages your home during construction, the general contractor’s liability insurance would cover the costs, and the contractor would file a claim with their insurer.

In cases where there is damage to the contractor’s equipment or materials, the contractor would file a claim with their property damage insurance. It’s also important that both you and the contractor document any damage or injuries immediately to avoid any confusion down the road.

What If the Contractor Doesn’t Have Insurance?

If the contractor doesn’t have adequate insurance and something goes wrong, you might be stuck paying for the damages or medical bills yourself. Even if the contractor has worker’s compensation, there’s a chance that you could still be liable for damages to your property. This is why it’s so important to verify the insurance coverage before signing a contract.

When to Contact Your Insurance Company

While your general contractor’s insurance should cover most accidents or damages, there may be times when you need to get your own insurance involved. If the damage is extensive or involves multiple parties, you might need to file a claim with your homeowner’s insurance. Your insurer will then work with the contractor’s insurance to determine who is responsible for the costs.

Communicating with Your Insurer

Always keep your insurance company in the loop if something goes wrong on the job site. They may be able to help resolve any disputes or ensure that the proper coverage is being used. If you have doubts about the insurance coverage, don’t hesitate to reach out to your agent for clarification.

Conclusion

Working with a general contractor means you need to have a clear understanding of how insurance policies function in the context of your construction project. From general liability to worker’s compensation, each insurance policy plays a crucial role in protecting you and the contractor. Always verify that your contractor has proper coverage, and don’t hesitate to ask for proof. By doing so, you can avoid unnecessary stress and ensure that your project goes as smoothly as possible.