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How to Make Sure Your Contractor is Insured in Los Angeles

How to Make Sure Your Contractor is Insured in Los Angeles

You’ve wanted to renovate your cramped, outdated California kitchen for ages. Or perhaps you are deciding between staying in your home after major damages or selling and walking away from some potential pricey repairs. Like many, asking around among friends and co-workers may initially help find and hire a contractor, but making sure your contractor is insured in Los Angeles is of vital importance.

Property Insurance – Although this article is focused on ensuring contractors are insured, property owners should always carry adequate property insurance. Don’t consider this optional or a nice to have. An active insurance property with adequate liability should be active, even before plans are made to repair your house.

Things can get ugly – and appallingly expensive – if your contractor isn’t insured. If things don’t go perfectly, you can land in a world of drawn out disputes, expensive fixes you have to foot the bill for, and far more stress than you initially bargained for. Issues mostly revolve around poor communication or construction defects, such as poor workmanship, improperly designed materials or failure to follow codes. Some common contractor and home builder complaints are:

  • Delays
  • Contractor being unreliable and unresponsive
  • Builder not completing the project as asked
  • Unhappy with the contractor’s quality of work
  • Going over budget
  • Builder won’t fix problems

You can avoid such a situation when repairing or upgrading your house in Los Angeles, however, by making sure your contractor is reputable and fully insured.

Difference Between Bonding and Insurance

Most reputable contractors in Los Angeles advertise themselves as “bonded and insured.” But what, exactly, does that mean?

A surety bond assures that you’re protected if the contractor skips out and doesn’t finish the project or if he winds up doing sub-par, shoddy work. This bonding ensures that you won’t have to use your own cash or homeowner’s insurance to foot the bill in such cases.

A contractor’s insurance protects you against the cost of both damages and lawsuits. If during the renovation project, some kind of damage occurs to your home, you (or your insurer) won’t have to pay for repairs. Also, if one of the contractor’s employees is injured working on your project, you won’t be liable.

By having both the surety bond and contractor’s insurance in place, this ensures that you as the homeowner will not be held liable and will not be personally financially impacted.

What Kind/How Much Insurance?

Taking steps to make sure your contractor is insured in Los Angeles is just the beginning. You also need to make sure the contractor has adequate coverage and the right types of insurance.

First, would the contractor’s insurance cover major damage to your home? If, say, you live in a $1.5 million home, and your contractor’s insurance would cover only $500,000 in damages, then you probably need to keep looking.

Your contractor should carry general contractor liability insurance comprising the following types/levels of coverage:

  • Liability insurance – Covers injury to you or your family and protects you from lawsuits
  • Workman’s Comp – Protection for the contractor’s employees in the event of injury (not required in all states for smaller contractors, so you’ll need to ask)
  • Property damage – Covers damages to your home during the course of the project

Here’s a more comprehensive list of insurance that general contractors may need:

  • General liability insurance Protects contractors from financial obligations for damages or medical payments caused by their work, such as bodily injury, property damage, or personal injury. This type of insurance is often required by clients to ensure the contractor has the financial ability to pay in the event of a claim. In many states, contractors also need general liability coverage to get a contractor’s license.
  • Worker’s compensation insurance Covers medical expenses and wages for workers who are injured on the job.
  • Commercial auto insurance Covers damage to the contractor’s vehicles, as well as injuries to people in accidents.
  • Business Owner’s Policy (BOP) A comprehensive policy that can cover property, business interruption, and commercial general liability insurance. BOPs can also cover projects that are still under construction or have been completed, regardless of whether the property is owned or rented

Steps You Need to Take

But how, precisely, can you make sure your contractor is insured in Los Angeles? There are several steps you can take mitigate your risk and make sure you’ve chosen a reputable, fully insured contractor.

  • Check out the contractor with the Better Business Bureau, Yelp, and Google Reviews
  • Check references and talk to former customers
  • Have a formal in-depth meeting with the contractor before signing any contract
  • Ask to see insurance and bonding documents and review them carefully
  • Get everything in writing – all aspects of work to be done, work milestones and payment schedule, completion date, contingency clauses, and so on

How Does Your Contractor Deal With Subcontractors?

Suppose, for example, your remodel project involves adding a room to your home. In that case, the general contractor will probably hire subcontractors to do the framing and brick laying and even, the electrical and plumbing work. But are the subcontractors insured?

It sometimes happens that subcontractors are brought in on a cash basis. There’s no record of their employment by the general contractor, and, as a result, they aren’t covered by the contractor’s insurance (or bonding) should something go wrong. So, in addition to investigating your contractor’s insurance status, you also need to determine how they deal with subcontractors.

Financial Impact – You may have heard that hiring contractors and subcontractors with insurance will affect price you were expecting to pay. The reality is bonded and insuranced contractors will cost more, but what you try to save in the short-term can quickly surpise you and balloon out of control if the unexpected happens.

Knowing how to make sure your contractor is insured in Los Angeles is crucial for any major work done in or on your home. Your local real estate professionals can also be a good resource when you’re checking out contractors.

If you’re still feeling overwhelmed and want to walk through all of your options, we would be glad to assist you! Feel free to contact us by phone at (626) 863-7006 or fill out our contact form to get in touch.

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