Building inspectors can uncover problems that should be addressed in remodeling and also monitor compliance with building codes during construction.
Home Insurance and Remodeling
While it’s likely that you already have homeowner’s insurance that covers a significant proportion of the current replacement value of your home, fire damage, theft and some amount of personal injury liability, consider the additional risks for a home under construction during a major remodeling project: construction accidents, additional fire risk, theft of tools and materials—or a curious kid from the neighborhood getting hurt on the site.
What Homeowners’ Insurance Covers
Before a remodeling project begins, homeowners should check with their insurance agents to whether additional coverage—if only temporary—is needed. If a remodeling project will add significant value to the home, of course, your lender will probably insist on your upgrading your replacement-value coverage. But to hedge increased liability during construction, consider an umbrella policy to cover the additional risks.
Check Contractors’ Insurance Coverage
In addition to making sure that you have enough liability coverage, make sure that contractors working on the project are adequately insured. For one thing, if a contractor doesn’t carry adequate liability coverage and someone is injured on the site, the injured party may come after you.
Working only with licensed contractors generally settles insurance issues. To maintain a valid license in most states, contractors must carry workmen’s compensation, a minimum level of liability insurance and often must be bonded. But even so, it’s a good idea to verify the insurance protection that contractors carry is adequate. Some contractors maintain only minimum coverage to keep their costs low. Contractors experiencing cash-flow issues may drop coverage temporarily.
To ascertain whether a contractor is adequately insured, ask for certificates of insurance—these should come to you directly from the contractor’s insurance company, not from the contractor himself.
Ask that the contractor provide you with original copies of liability and workmen’s comp insurance documents. Don’t accept photocopies, which can be easily doctored. Show the documents to your insurance agent and ask for opinions about their legitimacy and whether the coverage seems adequate.
Professional Liability Insurance
It’s also a good idea to make sure that an architect and other designers contributing to your remodeling project carry professional liability insurance. Such insurance covers them—and potentially you—in the event of claims that may result from errors in their work.
Insurance for Do-it-Yourselfers and Owner-GCs
- Homeowners insurance with replacement value coverage in an amount equal to the replacement cost of the existing house not including the lot plus the cost of the remodeling project.
- Adequate theft insurance to cover materials and tools that will be introduced to the site
- Umbrella liability coverage for extra protection in the event of an accident or injury on the site. Umbrella coverage is a supplement to homeowner and auto liability coverage.
- Workmen’s compensation insurance for all workers on the job not covered by a licensed contractor.
The price for upgraded and additional insurance coverage for construction projects is usually very modest compared to the price of the project itself, but the increased risk generally exceeds most homeowners’ means if they had to handle one more claims themselves. So if you’re planning a major—or even a modest remodeling project—study the insurance implications along with the plans.
