Risks in Hiring Uninsured Contractors

If you’re a homeowner, business owner, or real estate investor, your properties require maintenance. Roofs wear down, plumbing leaks, and sometimes you may want to remodel your space. In these cases, you will need to hire a contractor. But what if you hired an uninsured contractor for an extra help? In this case you shall think wisely. You should know what you need to do on the front end to be sure that this cheap labor option doesn’t turn out to be the most expensive help you’ve ever hired. This article is made to save you from out of pocket expenses from hiring an uninsured contractor.

What insurance should a hired contractor have?

Workers Compensation

The most important insurance that a hired contractor should have is workers’ compensation insurance. In an event where an uninsured worker/s get injured while working on your project, you could be held responsible for their medical bills and lost wages while they are unable to work, and your insurance might not cover this risk. Imagine how terrible things will be when you end up paying for an injured employee’s medical bills indefinitely, just for hiring someone to fix your property.

General Liability (With Products and Completed Operations)

Before hiring a contractor, you should make sure that the contractor has adequate general liability insurance coverage. For example, if you hired uninsured contractors to paint your building, and they accidentally sprayed paint onto the neighboring properties and caused damage, you could be responsible for paying those damages. If the contractors had insurance, their insurance policies would cover the damage.

In addition to adequate general liability limits, you should verify that your contractor’s insurance policy includes products and completed operations coverage. Products and completed operations coverage handles damage or injury the contractor causes after the job is completed. This not only protects you from lawsuits arising from damages contractors cause others, but it provides you with a policy to collect from if the contractor’s work causes you harm.

Auto Liability

Auto liability is overlooked coverage by many homeowners and business owners hiring contractors. Some contractors aren’t large enough to justify a fleet of work trucks, and some projects do not require this coverage. Look over your particular project to decide if auto liability is something you should add to your contractor requirements.

The primary reason we suggest adding commercial auto liability insurance to your contractor insurance requirements is for the loading and unloading coverage. Contractors often have materials and tools in their trucks.  If there was an accident while they were loading those materials in the truck or unloading the materials into your building, this would be an auto insurance claim and not a general liability claim.

How to verify a contractor’s insurance?

Certificate of Insurance

Verifying your contractor’s insurance requires a certificate of insurance. This is a document from your contractor’s insurance broker that verifies they have coverage in place.

Name and Date Verifications

To make sure that you are not hiring a handyman without insurance, it is essential to verify that the proof of insurance provided by the contractor applies to your project. Make sure the contractor’s name listed on the certificate is the correct name of the contractor you are hiring. Additionally, look at the date the certificate was issued. If that date isn’t on or after the date that you requested the certificate, you cannot be certain that insurance is still in place. Finally, an additional step of authenticity is to verify that your name is on the certificate as the certificate holder.

Other Considerations

Cheap contractor bids often mean fewer protections.

When hiring a contractor, keep in mind that the cheapest bids can come at a cost. It is often difficult for a contractor who is fully insured, has the quality protective gear, and adequately trains employees to compete against those who do not.

If you do take a low bid quote, verifying the insurance program becomes even more important in protecting your home or business from uncovered claims and lawsuits. The verification process is critical in trades in which the exposure to damage or injury is higher, such as roofing and framing.

Does your contractor hire uninsured contractors?

The same way that you verify that your contractor has insurance, your contractor needs to verify that their subcontractors also carry insurance.

How do you know if your contractor hires subcontractors? Just ask. It is important to make sure that anyone working on your building is fully insured, even if you don’t directly contract with them. If you are unsure where your contractor verifies insurance, require the subcontractors to provide a certificate or ask the contractor for copies of the certificate of insurance.

ONYX Insurance Brokers want to make sure that you are safe from any risk. We make sure that our insurance clients avoid the nasty surprises that often come along with hiring uninsured contractors. For your insurance needs, feel free to contact or email ONYX Insurance now!


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