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Home Remodels – Improvements – Risk Management for Home Owners

By February 11, 2020 Personal Insurance

Americans spend over $300 billion annually in home remodeling projects. This opens up a brand new source of risk for home owners.  One important way to reduce the risk is a technique known as contractual risk transfer. With a major remodeling project, the home owner should try to transfer as much of this newly acquired risk as legally possible to the general contractor (GC) and any subcontractors.

With virtually any type of major home improvement or building project involving contractors, a clearly worded construction contract is essential. The contract should outline the following.

  • Scope of the work and the total price
  • Legal names of both parties and the GC’s physical address
  • GC’s license and tax ID number
  • Labor and materials necessary
  • Warranty information
  • Timeframes in which the project will be completed, including estimated start and end dates
  • Role of the home owner and his or her responsibility
  • Indemnification clause that benefits the home owner

The contract should specify that the GC has workers compensation and commercial general liability (CGL) insurance and should also provide the home owner with certificates of insurance for both policies. In addition, the GC should list the home owner as an additional insured under the GC’s CGL policy and provide the home owner proof of his or her status as shown on a certificate of insurance provided by the GC.