When it’s time to make repairs or renovations to your home or business, don’t assume your existing property insurance will cover all risks that may occur while the project is underway.
If you’re a contractor performing work, ensure that the right policies or endorsements are in place before you begin. The future of your business depends on it.
Taking the time to confirm that adequate insurance coverage is in place can save time and headaches later. And it can save you from financial disaster if you end up in a legal dispute about your project.
What Home and Property Owners Need to Know About Insurance
If you’re a property owner, make sure all contractors you hire are licensed and insured. Failure to do so could leave you liable for damage or injuries that occur while they’re working on your property. Don’t be shy–ask for proof.
You may think of insurance for big-ticket items requiring a general construction contractor, but don’t forget about other contractors who may come into your home to perform work, such as:
- HVAC technicians.
- Carpet cleaners.
- Roofing or gutter repair people.
Check the Michigan licensing division to verify a contractor’s license status and to check for any disciplinary action. Additionally, some local governments (cities, townships, etc.) have their own licensing requirements. You can find out more about your local government by contacting your local clerk’s office. Consider having a trusted attorney look over the policies before you begin the project to ensure you and the contractors carry adequate coverage.
At a minimum, property owners should have coverage for:
Personal liability coverage typically pays for costs when you’re responsible for bodily injury, or property damage to another’s property due to negligence.
If someone is injured in an accident on your property and files a lawsuit against you, this coverage can help pay for your defense and financial liability.
This is separate from personal liability and generally provides immediate access to funds for medical expenses for visitors or guests injured on your property.
If your home is damaged due to a covered loss, this coverage provides you funds to stay elsewhere while your home is being repaired. This may be due to a natural disaster or a contractor’s mistake that makes your home unlivable.
Personal Property Damage or Loss
This covers damage or theft of your personal belongings. Check the limit and talk with your agent to determine whether you need additional coverage for special items.
If you’re a landlord, consider requiring that your tenants have renter’s insurance and a tenant liability policy. Renter’s insurance covers the personal property of tenants, which can help protect you from liability if their property is damaged or stolen.
Tenant liability policies will provide coverage if your tenant causes injury to someone on the property or causes accidental property damage. Likewise, if you rent business space, this type of policy can provide coverage and prevent you from being held personally liable.
What Is Builder’s Risk Insurance, and Do I Need It?
Builder’s risk insurance covers certain losses while a project is under construction. It will typically cover the property under construction as well as onsite project materials. Policies vary and will be specific to the needs of your project or your business, and either the property owner or the general contractor may purchase the policy. The policy purchaser and the listed additional insured may vary depending on the project.
On the property owner’s side, renovations to the existing property should be covered by the building owner’s property insurance. Builder’s insurance might be needed only for new construction. In some cases, builder’s risk insurance may be required to get a building permit or as a condition of a construction contract.
On the contractor’s side, builder’s risk insurance may provide coverage for financial losses or liability due to delays. Each contractor’s needs are different and may vary from project to project.
An experienced construction attorney can help you evaluate the need for builder’s risk insurance.
What Insurance Do Contractors Need When Renovating Homes or Small Business Property?
Whether you’re just getting started or an established contractor, it’s a good idea to review your insurance coverage from time to time and make sure it is sufficient for the type of work you do. If you have projects that vary in scope, you’ll want to ensure that your policy limits are high enough to cover increased risks.
The types of coverage available may vary in name depending on the provider, but here are some of the most common commercial contractor policies:
General Liability Insurance
General Liability Insurance commonly includes liability coverage for bodily injury and property damage. If you or one of your employees negligently causes physical injury to someone or damages someone else’s property, this type of policy provides coverage for legal costs and pays for any financial liability. General Liability Insurance may also be referred to as Commercial Liability Insurance.
Completed Operations/Product Liability
This policy provides coverage in the event the work you performed causes damage. For example, if you installed a deck that collapses, a policy like this may provide coverage for repairs and any injuries that result.
Most employers in Michigan are required to carry workers’ compensation insurance, although there are some exceptions. Workers’ compensation pays for medical treatment and a portion of lost wages for workers injured on the job.
Employment Practices Liability
This policy covers liabilities other than workplace injuries (typically covered by workers’ compensation insurance). It may cover legal fees and financial liability for harassment, wrongful termination, wage and hour disputes, discrimination, and other employment-related allegations.
Professional Liability Coverage
Often referred to as an “errors and omissions” policy, it generally covers mistakes due to professional negligence. If someone sues you for a mistake you made or for alleged misrepresentation, this coverage will cover your legal costs and financial liability.
Inland Marine Insurance or “Floater” Policy
This confusing-sounding policy got its name because it historically applied to goods transported by water. But it now generally applies to transported materials, regardless of the method. For example, if you’re shipping cabinets to a customer for renovations, it will cover the cabinets while in transit. It will also generally cover your business equipment from theft, vandalism, or damage during shipment, transport, or onsite storage during the project.
It is important to remember all insurance policies are different and generally can be tailored to your exact needs. If you have questions about your insurance coverage, the real estate attorneys at Kreis Enderle are happy to review your policies or construction contracts before you start your project.