I have been wanting to post about insurance policies and construction projects for quite some time, as there is a great deal of confusion about what kinds of policies are necessary and which items are covered.
Mark Tarpey of Tarpey Insurance Group provided me with this guest posting:
For New Construction, the Purchase and Sales Agreement must be reviewed to determine who is providing the insurance during the course of construction. I have seen contracts that require the builder to carry it and some other contracts require the homeowner to provide the coverage.
The builder will provide the coverage under a Builder’s Risk Policy. The homeowner can purchase a standard homeowner’s policy with an endorsement to cover the theft of materials( this is excluded under a regular homeowner’s policy). If the homeowner owns the lot during the construction phase, they should require the builder to list them as an additional insured under the Builder’s general liability policy.
During a remodeling project, there are two scenarios that need to be addressed. If the homeowner is staying in the house during construction, then they will need to increase their current homeowner’s policy to adequately reflect the new replacement cost of the home. If the homeowner is moving out during the renovation period, they will need to contact their agent to discuss the options available. Typically, the homeowner’s policy is cancelled and a new policy is written to cover the property during the renovation phase and the homeowner’s policy is re-written when they move back in.
In regard to what kind of insurance a contractor should have, the homeowner should require the following:
General Liability - $1,000,000 each occurrence, $2,000,000 general aggregate and $2,000,000 products/completed operations aggregate
Workers’ Compensation- $100,000/500,000/100,000 and they should require all subcontractors to have coverage as well
If a contractor does not carry worker’s compensation coverage, the injured employee could sue the homeowner/property owner for failing to provide a safe work place. I have seen claims against the property owner that can be very significant and could exceed insurance limits and the owner could be responsible for the difference.
General Liability covers bodily injury and property damage arising out of the negligence of the contractor. Each policy is different and can have several endorsements that exclude specific types of claims. The general liability is not suppose to cover the poor workmanship of the contractor but it is suppose to cover the resulting bodily injury or property damage( this is very basic information and can be very misleading).
The homeowner’s policy covers the dwelling, any detached structures( up to a sublimit), personal property, additional living expense( a hotel room if you have a fire and can’t stay in the house) and personal liability. There are so many different types of enhancement endorsements that can broaden the coverage( sewer or drains backup, earthquake, jewelry coverage).
Tarpey Insurance Group is a family owned and operated independent insurance agency with 4 locations throughout Greater Boston. The agency consists of 25 employees with 6 Tarpey family members actively managing the business. We represent 15 insurance companies to place your business. The agency has two divisions – Personal Insurance which handles auto, home, watercraft and personal umbrella and Commercial which insures all types of businesses including contractors, professional offices, manufacturers, distributors and building owners.
Please visit www.Tarpeyinsurance.com
for additional information or contact us at 1-888-827-7397.