Let’s talk about the importance of insurance first. Contractors should carry two types of insurance: liability and worker’s compensation. As a homeowner, these protect you in two ways. First, liability insurance will protect you in the event the contractor causes damage to your home. What if, say during an upstairs bathroom remodel, your uninsured contractor was doing work that caused the bathtub to crash through the floor? If you think your homeowner’s policy would cover you, think again. It likely won’t, unless you’ve purchased additional coverage for in-home employees.
What if the contractor had an employee on the job at your home who was injured on your property but the contractor didn’t carry worker’s compensation insurance? Your homeowner’s insurance policy might help cover the cost to pay that worker’s claim, after you meet your deductible, but that claim could result in an increase in your rates and make it more difficult for you to get insured in the future.
Bonding is often confused for insurance, but there is a notable difference. A bond is intended to act as a guarantee that the contractor will perform the work as he or she is supposed to. It is secured money that would be distributed to the homeowner in the event the contractor failed to perform as he or she should. For example, if a plumbing contractor failed to perform a pipe repair adequately and caused a leak that went undetected and caused damage to the home. Or, if a company employee stole personal items from your home, the bond would cover that loss. Don’t take a contractor’s word that he or she is bonded. Ask for proof of the bond and be sure you understand exactly what it covers.
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