First things first, do not hire an uninsured contractor, but the only way to know if they are insured is to ask. When you are asking for proof of insurance, you are asking for general liability insurance and workers compensation insurance. In this article, we are going to inform you of the importance of hiring an insured contractor, so you never make the mistake of hiring one without insurance.
The Risks of Hiring an Uninsured Contractor
You can get sued. Yes, that’s right, the contractor and any subcontractors you hired to work for you can sue you. If any of them sustain an injury while working on your property, they can file a lawsuit against you. If they make any mistakes while working on your home, again, you are liable. Most contractors who do not have the proof of insurance will likely charge you less for their services, as they are saving money by not paying for general liability insurance and workers compensation insurance.
If something goes wrong, your contractor will file a claim on your homeowners insurance policy. Therefore, you should be skeptical when going for the contractor who quoted you the cheapest price. Another reason why it may not always be a good idea to go with the lowest quoted price because there is a risk of the contractor leaving the work half completed.
Additionally, there is always a risk of someone getting injured while on the job. If the contractor you hired does not have any type of insurance, specifically workers compensation insurance. If an employee of the contractor sustains an injury while working on a part of your house and they have not provided that worker with insurance, that worker will file a claim against your homeowners insurance policy, thus making you liable for it.
When Should You Ask for Proof of Insurance?
You need to ask your contractor to provide you with proof of insurance the following times:
- You have obtained installation and repair services for vehicles, homes, and businesses
- You have a lease or rental agreement with the owner of the house
- You have hired a contractor to remodel or renovate your home
- You have hired independent contractors or workers working on a contract-based agreement
- You have hired the services of mortgage brokers, CPAs, staffing firms, and consultants
- You have hired service contractors such as maids, gardeners, and housekeepers
Contractors and carpenters should have general liability insurance Mortgage brokers, CPAs, staffing firms, and consultants should have professional liability insurance, which also includes omissions and errors coverage. Any workers you have hired to perform work on your house should have workers compensation insurance. If the workers will be using cars on the job, they should have commercial auto coverage insurance on top of workers compensation insurance and general liability insurance.
What If the Contractor Tells Me They Will Never Sue?
You ask for proof of insurance from a contractor you plan to hire, but they tell you they do not have any type of insurance, but they also add, they will not sue if you something happens. If a life altering event happens such as the contractor suffering from an injury that makes them permanently disabled, do you think the contractor will not press charges against you?
Most likely, they will sue you, making a claim against your homeowners insurance policy. Even though the contractor did not take steps to protect them and their families, they will want to after something grave happens.
Imagine if an accident on your property occurs. The contractor will not want to pay for the damages such as for damaging your ceilings, floors, and walls. To make them pay for the damages, you will need to take them to court and that means paying legal fees.
Do you want to deal with all of that? No, right? For this reason, you need to get a contractor who has taken out insurance.
Apart from homeowners, landlords should not also be wary of hiring an uninsured property management company.
The Consequences of Hiring an Uninsured Property Management Company for Landlords
Landlords should ask for proof of insurance from the property management company then intend to hire to perform work on their building. In the event an incident occurs on your property, you will be liable for it, as courts mostly hold the landlord responsible.
You should also stay away from hiring a contractor who is your friend or family member. Even if you hire a friend or family member to work for you as a contractor and they do not have insurance, do not think the risks of them making a claim against your policy, taking you to court, and other risks associated with it will go away.
If they make a claim with their insurance company for instance, the insurance will go after you once they have reimbursed your friend or family member, and this is known as subrogation proceedings.
The Point Is Simple: Avoid Hiring an Uninsured Contractor
Do not hire an uninsured contractor, as the risks involved with hiring one is high. Make it a point to hire an insured and licensed contractor to perform work on your house. The worst-case scenario of hiring an uninsured contractor is you having to file for bankruptcy so why not protect yourself from the start by hiring an insured contractor.
Why put yourself at risk in the first place just to save a few bucks here and there? If an incident happens, you will be responsible for it and the related expenses that result for it, only because the contractor or workers you hired to perform work on your house did not have insurance. Do not take the risk, but always ask for proof of insurance before you hire them.
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