You’ve wanted to renovate your cramped, outdated kitchen for ages.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 Washington is of vital importance.
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. You can avoid such a situation, however, by making sure your contractor is reputable and fully insured. How to Make Sure Your Contractor is Insured in Washington, read more below.
Difference Between Bonding and Insurance
Bonding and insurance are two essential elements in the world of contracting and business, often confused but serving distinct purposes. Understanding the differences between the two can help contractors, clients, and businesses navigate their obligations and protections more effectively.
Insurance:
Insurance is a financial product designed to protect against specific risks or losses. When a contractor purchases insurance, they are essentially transferring the risk of certain liabilities to an insurance company in exchange for regular premium payments. There are various types of insurance policies, but the two most common in contracting are:
- General Liability Insurance: This type of insurance provides coverage for property damage, bodily injury, and personal injury claims that may arise during the course of work. It protects both the contractor and the client from financial losses resulting from accidents or negligence.
- Worker’s Compensation Insurance: Required in most states, this insurance provides benefits to employees who suffer work-related injuries or illnesses. It covers medical expenses, lost wages, and rehabilitation costs for injured workers, protecting both the contractor and the employee.
Insurance policies have limits and exclusions, and coverage varies depending on the specific policy purchased. Contractors typically obtain insurance coverage from private insurance companies.
Bonding:
Bonding, on the other hand, is a risk management tool that provides a financial guarantee to the client that the contractor will fulfill their contractual obligations. There are several types of bonds, but the most common in contracting are:
- Contract Surety Bonds: These bonds, including bid bonds, performance bonds, and payment bonds, are typically required on construction projects. Bid bonds assure the client that the contractor will enter into the contract if awarded the project. Performance bonds ensure that the contractor completes the project according to the terms of the contract, while payment bonds guarantee that subcontractors and suppliers will be paid.
- License and Permit Bonds: These bonds are required by government agencies to obtain licenses or permits for certain types of work. They provide financial protection to consumers in case the contractor fails to comply with licensing regulations or fulfill their obligations.
In summary, insurance protects against unforeseen risks and liabilities, while bonding provides a financial guarantee of performance and compliance with contractual obligations. Both are important tools for contractors and businesses to mitigate risks and provide assurance to clients and stakeholders.
What Kind/How Much Insurance?
Taking steps to make sure your contractor is insured in Washington 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
Steps You Need to Take
But how, precisely, can you make sure your contractor is insured in Washington? 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
- 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
- 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. 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.
Knowing how to make sure your contractor is insured in Washington 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 (253) 799-1210 or fill out our contact form to get in touch.