Always Make Your Contractor Shows Proof of Insurance

Always Make Your Contractor Shows Proof of Insurance

Dr. Phil likes to say that if you choose the behavior, you’ve also chosen the consequences. Projects involving contractors are one of the cases where Dr. Phil’s perception fits perfectly. Such projects are often big ones, and (God forbid) if something goes wrong, the chances are that the damage could be costly, financially. The worst-case scenario is that someone’s life may be in danger. To avoid all these unnecessary complications ask contractors for insurance, and to help you understand how serious this is, let me point out a few things.

It’s Not My Fault!

That’s what your contractor will either imply or say explicitly and without shame, if you make the mistake of hiring one without insurance. But what is the significance of the contractor providing proof of insurance in the first place?

Accidents happen, and when they do, someone has to be held responsible, and someone has to pay for the damages. You don’t want that person to be you, especially if it is not your fault.

What Insurance?

Any contractor hired for a project ought to be in possession of a General Liability Insurance. Moreover, if he or she will involve subcontractors, carpenters, electricians or any other workers in the project, he or she should also have Workers Compensation Insurance and Auto Coverage Insurance (only if vehicles will also be involved).

General Liability Insurance is a guarantee that the contractor will take care of any damages that take place while working on your project. The Workers Compensation Insurance is for handling any accidents that involve the third parties the contractor brings into the project. The auto or car insurance does what you already know; takes care of any vehicle-related damages.

What You Stand to Lose

Now, if for some reason you were ignorant and happened to hire a contractor without confirming their status as far as being insured is concerned, if some accident occurred while they are working on your project, believe it or not, they might sue you.

They’ll say the accident was your fault; that it was your house, or office, or poor working conditions, or whatever they’ll come up with for pinning the blame on you, just to avoid paying for the damages. I’m sure that doesn’t sound nice at all, and it’s a situation you don’t want to deal with. The damages could be in terms of thousands of dollars or millions. Again, worst case scenario, it could involve someone’s health.

Another danger of hiring a contractor without proof of insurance is that they may disappear before completing the project. This scenario is particularly true if you happen to be loaded such that you pay them in excess before they complete their task.

Protect Yourself, Protect Your Assets

You can see that you stand to lose way too much just for ignoring this essential aspect of the client-contractor relationship.

Ask contractors for proof of insurance before hiring them for your project. It’s that simple; just ask them for it. If a contractor indicates that they have none or start behaving funny regarding your reasonable request, keep looking; that person’s troubles are not worth your time and money.

Furthermore, if a contractor seems cheap, and you haven’t yet confirmed whether they are insured, the chances are that they are not. Important projects should cost as much as their degree of significance.

When dealing with expensive projects, you should always take the necessary measures to ascertain that you only pay for what the project is worth; not unnecessary extra damages. Always ask your contractors to provide proof of insurance before engaging in such crucial projects.

4 Types of Contractor Bonds

4 Types of Contractor Bonds

In general, there are different types of contractor’s bonds that you need to have before signing to undertake a certain construction project. These bonds include; Bid bonds, a licensing bond, a performance bond, and a payment bond but not limited to this list only.

Performance bonds

A well-defined performance bond is a tool to ensure financial assurance that a project will be implemented in accordance with the owner’s expectations, regardless of the contractor initial conditions. For instance, the contractor may fail to execute the work according to the agreements signed in the contract acceptance documents, the guarantor who has signed a performance bond has the authority to make payments to another contractor to finish the project. Performance bonds are ordinarily used in property development where the clients or investor may require a supplier or contractor to ensure that project managers receive such securities to ensure that labor costs are not lost in case of the project failure.

Payment bonds

A payment bond is used if the project has no adequate money so the client will pay the contractor according to the amount of work completed but not the whole project. The client may subtract contact another contractor after they get more money. The payment bond guarantees that the client pays for the work and material which the project has consumed up to that level. In case a payment bond had not been acquired and if such subcontracting fees are not paid, the owner who has paid to the Contractor may be confronted with subcontractor’s liens or against a completed project.

Contractor’s License Bonds

Contractors are required by law in many countries to be issued with a contractors license so that the clients can check the contractor’s ability to perform a certain project before accepting that contractor to undertake the project. Bonds of this type generally pay for property damage caused by mismanagement of materials or theft of projects tools as result incapability of the contractor’s company to provide security of these items.

Bid Bonds

Bid Bonds – Provide the clients with a guarantee that the Contractor has tendered a bid and they have disclosed all material information that can be used in legal cases and they have done it good faith. This means they will execute the project without such intention extending the time for implementing the project or the project price and has the ability to obtain the requested amount.

Bonds are tools that provide financial assurance when a construction project is not implemented as per the first plan. If the Contractor leaves work or they become insolvency, this contractors bonds will cover this amount up to the amount of the guarantee.