In many areas of the United States sole proprietors are not required by law to have liability insurance or workman’s compensation. In order for homeowners to avoid footing the bill in the event of an accident or a renovation gone awry, it is important for consumers to obtain proof of insurance before the start of any project.
It’s important for homeowners to understand contractor liability before the start of any renovation in order to protect themselves. As long as a contractor has general liability insurance, workman's compensation, and there's not gross negligence on the homeowners part then they will not be held accountable in the event of an injury or accidental damage.
Homeowner’s insurance policies generally do not cover incidents involving uninsured and/or unlicensed contractors. Uninsured contractors also tend to be unfamiliar with building codes and are usually unable to apply for permits. When a project lacks the proper permit(s) a homeowner can be ordered to remove or repair the work that has already been completed.
Regardless of the project’s size it is very important to have a written contract that gives a clear scope of all work to be completed. Once a written agreement is signed homeowners should request the contractor's insurance binder and follow up with the insurance company to make sure the policy covers the each aspect of the project. Some contractors buy inexpensive policies that do not cover bigger projects. For and added layer of protection clients can be asked to be added to the contractors policy as 'additionally insured. Bottom line, a project should not begin until a written contract is signed and insurance is verified by the consumer.
Licensing agencies often maintain a guaranty fund and offer mediation services in case there is a dispute between one of their contractors and a consumer. Licensing agencies can also revoke a dishonest contractor’s license which works to encourage honest hard work from licensed construction professionals. Unlicensed workers go in and out of business readily and can more easily avoid civil suits.
For more information about Michigan contractors insurance, give Insurance Planning Service a call at 800-220-5582.