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Does My Contractor Need to Carry Contractor Insurance?

how much is contractor insurance

By Lee Wallender. Home Renovations Expert

As the ultimate know-nothing beginner, Lee Wallender's first experience with home renovation was remodeling a 100 year-old house.

How To Contact Me

Unfortunately, it has come to the point where I cannot answer readers' individual questions about home remodeling. The backlog has become so great that I feel I cannot adequately serve readers. If you have emergency questions, write to the address below and I will try to answer.

Q: Why is the surety bond sometimes confused with insurance?

If the contractor fails to meet conditions of the bond, the consumer may file a claim against the bond. But the surety bond isn't just there for the consumer. In some cases, this instrument can also be used by the contractor's suppliers or employees.

Q: What amount does the contractor need to carry?

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Not only that, but specialty remodeling contractors (vs. general contractors) typically hold bonds of lesser amounts.

Q: Does that mean that in California, for example, I can file a $12,500 claim against a bad contractor?

A: No, not necessarily. These bond amounts are per contractor, not per job. So, the $12,500 may be shared among other jobs.

Q: Can I recover damages from my contractor if he finishes 2 days late for my addition project?

A: Surety bonds aren't there for every little problem between homeowners and contractors. There are two main areas that are covered.

  1. Damage.  Consumers whose personal family residence that is damaged as

    a result of a violation of the licensing requirements can file against the bonds.

  2. Fraud.  As California states, consumers who are "damaged as a result of a willful and deliberate violation [of licensing requirements] or by license fraud" can file.

Fraud is one area that state licensing boards are especially interested in preventing. As far as "damage" goes, that's a vague area that often can only be determined in a court of law.

After all, what is "damage"? Your addition was finished one month late and you're simply mad about it? Is that damage? Or, it was finished one month late, and you were unable to set up your anticipated home business and lost $5,000 in project revenues. Is that damage?  These are matters more for seeking recompense in a civil court via lawsuits than from filing against bonds.

Q: How do I recover money from this bad contractor?

A: If the contractor has failed to make good, then go to the state contractor licensing board and the surety bond company. The boards regulate bonding, and should have information on hand as to which insurance company you should contact. After that point, you should no longer have to deal with the contractor. The insurance company will be the go-between. The insurer may have to take the contractor to small claims court to recover money paid out from the surety bond. In any case, that's another reason why it's not truly "contractors insurance": the contractor is required to pay the money back to the insurance company.

Category: Insurance

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