Embarking on a remodel is a rewarding experience, but it is also challenging. There are a variety of permits, licensing, and contracts to wade through. By using a dedicated contractor, such as a design-build remodeler, the guesswork is often taken out of the equation. But what types of insurance should your contractor carry? What happens if a contractor or a subcontractor is hurt working on your house? What if you or a member of your family is hurt or something on your property is damaged by a contractor? Even the most prepared contractor can fall victim to a random accident or an unforeseen event.
It is important that all contractors carry liability insurance AND workers compensation insurance. However, Illinois only requires contractors to have liability insurance. What does this mean for you?
What Kind of Insurance Should a Contractor Have?
Illinois is unique in that contractors must carry liability insurance, but are not legally obligated to retain workers compensation insurance. This means that if you hire a contractor, and they, in turn, hire trade professionals (or subcontractors), they are not necessarily covered by workers compensation insurance. Which means that if they get hurt on the job at your home, you may be held liable.
According to House Logic, a contractor's insurance policy should include the following:
- Any bodily injury or property damage the firm accidentally causes to you, your family, and your property.
- Workman’s compensation for injuries builders cause to themselves or their employees. (Not all states require this for small contractors, so ask your contractor to provide you with a policy certificate.)
- Accidents involving the contractor’s own equipment, such as falling off a ladder. (Contractors using your ladder could claim it was your faulty equipment, not their clumsiness, leading to an insurance battle and a lawsuit. Don’t provide your contractor with anything more dangerous than a pencil.)
Often, a contractors insurance company will require workers compensation for all trade partners and subcontractors, therefore, the contractor will require trade partners to carry minimum limits, while this should be best practice, it doesn't always happen, as firms avoid this provision to lower rates and reduce overhead. While this often allows for a monetary edge over competitors, it leaves the homeowners with an increased vulnerability to lawsuits or unwanted policy claims.
What is Workers Compensation Insurance?
Employers are legally obligated to take “reasonable care” to ensure that their workplaces are safe. In the event of an accident, however, workers compensation provides coverage to the employee. This type of insurance ensures that an injured worker receives proper medical care and reasonable compensation if an injury sustained at their place of employment leaves them unable to return to work. It also protects employers from lawsuits by employees.
Each State is Different
Workers compensation laws and legislation differ from state to state. As mentioned previously, Illinois does NOT require contractors to carry workers compensation, although a contractors insurer may require it independently from state statutes. Unfortunately, in Illinois, not all workers are considered employees under the states compensation law, which states that “only employees receive benefits, including medical expenses and/or lost pay”.
What Can You Do?
When researching a design-build remodeler, make sure to ask the right questions. Don’t be afraid to ask questions of the firm you are researching. Ensure that all trade partners of your potential remodeler provide proof of insurance- depending on the type of remodel you are planning, these occupations could range from electrician to carpenter, plumbers or even painters. To protect yourself from potential lawsuits, it is imperative that your design-build firm can account for everyone working on your project.
While the laws surrounding insurance can be murky and lead to unintended consequences, your contractor should be able to walk you through the process each step of the way. Ask the right questions, and you will be well on your way to a smooth remodel.