Cover Your Bases
Building and renovation projects demand insurance coverage
By Scott Brothers
 While remodeling a business can be an exciting adventure, it can also be frustrating if you haven’t covered all the bases. Before you begin, there are several things you may want to consider.
First, you need to plan ahead. If you will be doing the work yourself, you will need to secure a general liability policy that will protect your responsibilities as the contractor. In addition, you will want to check with your workers’ compensation carrier to be sure you are protected for any on-the-job injuries for employees doing the construction work.
If you will be using a general contractor or even sub-contractors to help you complete the work, you will want to be sure to select a contractor who can do a complete professional job. Here are a few questions to have your contractor answer to your satisfaction before you enter into any agreement to begin your building or remodeling job.
1. Are you licensed?
Make sure your contractor is properly licensed. If you don’t know the licensing laws in your area, check with your city or county planners to be sure. Be certain the contractor shows you a copy of his license, and don’t forget to check the expiration date. If a contractor cannot produce a valid license, don’t hire him.2. Do you carry general liability insurance? Make sure your contractor has adequate insurance. This type of insurance protects against bodily injury or property damage in case of damage caused by the contractor and/or his employees.3. Do you carry workers’ compensation insurance? This will protect you from liability if a worker is injured while on your property. If the contractor doesn’t carry workers’ compensation, you may be liable for any injuries suffered by the contractor or his employees on your property.4.Will you provide me with a written lien waiver? Your contractor should provide you with this legal document at the end of the job. This waiver says you have paid the contractor in full for the services rendered and the contractor waives his right to place a lien on your property. You may want to also get a release from each of the material suppliers or sub-contractors to protect yourself in case the contractor doesn’t pay his material suppliers or sub-contractors on your job.5. Do you guarantee your work? Your contractor should guarantee his work for at least one year from date of completion. Some contractors guarantee their work for two or even three years. In any case, be sure to get the guarantee in writing.Builders risk insurance Whether you are hiring a contractor or doing the work yourself, you will want to consider buying builders risk insurance. If this is new construction, you will need just to protect the new structure. If it is a remodeling job, you will want to be sure the coverage protects the existing structure as well.
Builders risk insurance can cover buildings and structures under construction, remodeling or repair. It typically covers the same types of things as regular property insurance. Be careful to determine when the insurance terminates. Even though many policies extend until the building or structure is completed and/or accepted by the owner, others may contain different terms and may expire at an earlier date such as “when the building is reasonably ready for occupancy.” Builders risk policies can offer a wide range of coverage, including: - Theft of tools, equipment and building and landscaping materials from the time they are delivered on the job site
- Materials in transit and at temporary locations
- Job materials as well as office and tool trailers
- Mechanical and electrical breakdown
- Backup of sewers and drains
- Ordinance and laws that change during construction
- Soft costs—some policies cover “soft costs” associated with other aspects of a construction project, like financing, marketing, legal, accounting, additional property taxes and loss of income resulting from property damage.
Builders risk policies do not cover losses that occur before the project is started or after it is completed. Quite often, builders risk policies do not cover earthquakes and floods, but some companies may be able to provide this coverage at an additional cost. Who needs builders risk insurance? Anyone with a financial interest in the construction, remodeling or repair project should consider builders risk coverage. If you will be financing any part of the project, your lender will most assuredly request a copy of the policy to protect their financial interest. A good neighbor You will want to involve your neighbors in the process. Once you have decided to remodel, you need to remember they may not be thrilled at the thought of a project in their neighborhood. Before starting, be sure to inform them of your plans, including the length of time you expect the project to take.
Bringing in contractors for several weeks or even months can affect the neighborhood. To keep peace in the neighborhood, be sure to let your contractors know to use noisy power tools during standard business hours. Inform your neighbors if any large trucks will be entering the neighborhood, and ask your contractors to keep your street open to other traffic. Remove dumpsters as quickly as possible, as they make unattractive nuisances and may cause liability problems for you or your business neighbors. Once the project is complete and you are ready to occupy the new or remodeled premises, be sure to review your business insurance program to be certain you have adequate protection for the increased value of your property, including buildings, equipment and business personal property. What could be worse than to have just completed your dream project and see it destroyed, only to discover your regular insurance program has not been updated along with the physical facility and not be able to rebuild? Now that you’re aware of these issues, it may help you to be better prepared for your next building or remodeling project. Scott Brothers is the president and CEO of Joplin, Mo.-based The Insurancenter, which has been serving the carwash industry since 1986.
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