There’s been an interesting shift in some of the builder’s risk and vacant remodel policies I’ve helped clients with this year that was present last year. The fact is fewer of companies who write these policies are offering general liability coverage with the policy, and that could impact the homeowner if something goes wrong.
General liability is a commercial insurance policy designed to protect the policy holder if they are sued for negligence. Some general contractors and many tradespeople carry this type of insurance, and several companies offered this coverage on a vacant remodel to the homeowner, but that number is getting smaller and smaller. Let’s review what insurance should be carried by the contactor and trades, as well as the homeowner.
Homeowner: If your home insurance provides coverage for your home during and after the remodel project is complete, then go with that as all home policies include some type of personal liability coverage. If that’s not the case, get a vacant remodel or builder’s risk policy, whichever one fits your project best, and consider getting a personal umbrella policy which provides personal liability coverage.
Contractors & Trades: Most professional contractors and trades carry general liability insurance, but always confirm that they do. Ask for a certificate of insurance that names you (and your spouse or partner) as an additional insured; doing so extends that coverage from their policy to you. If the contractor doesn’t have general liability insurance, then find one who does. In addition, the trades who usually carry general liability are plumbers, electricians, masons, most carpenters, and roofers. The limits the trades should have should be at least equal to the contractors.
Investors and Flippers: It makes good business sense for investors and flippers to carry general liability insurance, especially if they are acting as the general contractor on the project. The reason is, if something goes wrong, the buyers will sue you first before they name any of the trades. The cost to buy general liability insurance is much less than paying to hire an attorney to defend you on an hourly basis. Lastly, general liability insurance is not a replacement for a vacant remodel or builder’s risk policy. One covers the property while the other covers you.
The purpose of insurance is to move the financial burden of a major loss from you to the insurance company. Having the right coverage, for whichever role you play here, keeps you, the homeowner, from being exposed financially if something goes wrong. What do you think? Share your comments, thoughts, and experiences with me on my Facebook, Google +, and LinkedIn pages. I’d love to hear from you!