Planning a renovation, remodel, addition, landscaping project, or major repair?

You probably have a long list of things to think about:

What will it cost?

How long will it take?

When can they start?

But there’s another question that deserves just as much attention:

Is the contractor properly insured?

Hiring a contractor without verifying their insurance can expose you to unnecessary financial and legal risk.

California’s Department of Insurance specifically recommends asking contractors whether they carry general liability and workers’ compensation insurance and requesting a certificate of insurance. The Department also advises consumers to verify the information and warns that an uninsured contractor can create liability concerns for the property owner.

Here’s your pre-project insurance checklist.

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1. Ask: “Are You Insured?”

It sounds obvious, but ask the question directly.

A professional contractor should be able to provide information about their insurance coverage.

Depending on the work being performed, relevant coverage can include:

• General liability insurance
• Workers’ compensation
• Commercial auto insurance
• Other business-specific coverage

The exact insurance requirements can depend on the contractor, project, employees, subcontractors, and applicable laws.

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2. Ask for a Certificate of Insurance

A Certificate of Insurance (COI) is a document that provides evidence of insurance coverage.

California’s Department of Insurance recommends requesting a certificate that shows information such as the insurance company, policy number, and policy limits.

But here’s an important point:

A certificate is evidence of coverage—it isn’t the insurance policy itself.

If you’re unsure about what you’re looking at, ask questions.

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3. Verify the Information

Don’t simply glance at the certificate and put it in a drawer.

California’s Department of Insurance recommends contacting the insurance company directly to verify information on the certificate.

Why?

Because you want to make sure the coverage is actually in effect and applicable to the contractor you’re hiring.

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4. Ask About Workers’ Compensation

If the contractor has employees, workers’ compensation can be particularly important.

California’s Department of Insurance states that California employers must provide workers’ compensation benefits to employees, subject to applicable legal rules and exceptions.

If someone is injured while working on your property, you don’t want to discover after the fact that the contractor didn’t have the appropriate coverage.

Ask:

“Do you carry workers’ compensation insurance?”

And ask to see the documentation.

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5. What If the Contractor Uses Subcontractors?

This is an important question that homeowners sometimes forget.

A contractor may hire:

• Electricians
• Plumbers
• Roofers
• Painters
• Flooring installers
• Landscapers
• Other specialty trades

Don’t assume the main contractor’s insurance automatically covers every subcontractor and every situation.

Ask:

“Are your subcontractors insured?”

You may also want to know whether they carry appropriate liability and workers’ compensation coverage.

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6. Ask About Your Own Insurance

Hiring a contractor can also be a good reason to contact your own insurance agent before the project begins.

Tell your agent:

• What you’re doing
• How extensive the project is
• Whether you’re adding square footage
• Whether you’re adding an ADU
• Whether you’re changing major systems
• Whether the home will be occupied during construction
• Whether the project affects the structure

Your existing homeowners policy may need to be reviewed depending on the scope and circumstances.

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7. Keep a Project File

California’s Department of Insurance recommends keeping a job file containing documents related to the work being performed.

Keep:

• The contract
• Contractor information
• Certificates of insurance
• Receipts
• Invoices
• Permits
• Photos
• Change orders
• Correspondence
• Warranty information

Take photos of the property before work begins.

Then photograph major stages of the project as work progresses.

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8. Don’t Automatically Choose the Lowest Bid

Price matters.

But insurance and professionalism matter too.

Two contractors may give you different bids because they have different:

• Insurance costs
• Employee structures
• Materials
• Experience
• Scope assumptions
• Business expenses

A contractor who offers the cheapest price isn’t necessarily offering the best overall value.

Before hiring someone, compare more than the number at the bottom of the estimate.

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9. Be Careful After a Disaster

After a major storm, fire, flood, or other disaster, homeowners can be particularly vulnerable to contractor scams.

California’s Department of Insurance advises consumers to verify insurance coverage and be cautious when selecting contractors after disasters.

Take your time.

Verify information.

Get documentation.

And don’t feel pressured to sign something simply because someone shows up at your door.

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10. Ask These Questions Before Work Begins

Here’s a simple checklist you can save:

☐ Are you licensed as required?
☐ Do you carry general liability insurance?
☐ Do you carry workers’ compensation insurance?
☐ Can I see your certificate of insurance?
☐ Can the insurance information be verified?
☐ Do your subcontractors carry insurance?
☐ Who is responsible if property is damaged?
☐ Do I need to notify my insurance agent?
☐ Are permits required?
☐ What documents should I keep?

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The Bottom Line

A contractor’s insurance may not be the most exciting part of a renovation—but it’s one of the things you should verify before the work begins.

Taking a few extra minutes to confirm coverage can help you avoid a much bigger problem later.

At Farrell & Associates Insurance Agency, we can also help you understand whether your own insurance should be reviewed before a major project begins.

Planning a renovation or major repair? Give your insurance agent a call before the first hammer swings.

A Note to Our Readers

This blog post is intended for general informational and educational purposes only and is not a substitute for reviewing your individual insurance policy or speaking with a licensed insurance professional. Every policy is different, and coverage depends on the specific terms, conditions, limits, exclusions, and endorsements of your policy.

When in doubt, talk to your insurance agent. Your agent can help you understand your specific coverage and determine whether your policy is appropriate for your individual needs.