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If you have just insured your new home and paid a year's premiums in advance as required by many lenders, you may think you can forget about insurance for a while. But what if you are planning to remodel your home? Your liabilities may not be covered under your current policy.
Homeowners spend approximately $100 billion annually on home improvements either preparing a home for sale, to remain in their homes or improving the home after move-in. But before the first nail is hammered, you should check with your insurance representative to make sure your home, the contractor and the subcontractors have adequate coverage.
According to the Insurance Information Institute (I.I.I.) homeowners who wait until an addition or extra room is completed to increase their coverage are making a mistake. If the new addition is destroyed or damaged before insurance coverage has been increased, the homeowner may be responsible for the cost of repairing or rebuilding the addition. The I.I.I. suggests that homeowners contact their insurance agent before or shortly after work begins to increase the insurance coverage to cover rebuilding/replacement costs.
Although it varies from state to state and among individual contractors, homeowners need to make certain that the contractor they have chosen has workers' compensation. Workers compensation pays for medical and rehabilitation expenses, and lost wages if a worker sustains injuries on the job. In some cases, contractors without this coverage may hold the homeowner financially responsible.
In many home improvement projects, the contractor subcontracts the carpenters, electricians, and plumbers. If the workers are not full-time employees of the contractor, they are not covered under the contractor's workers compensation policy.
It is the job of the homeowner to find out the situation. If the contractor has insurance, you are well within your rights to ask to see the policy and determine for yourself if the coverage is sufficient, and whether or not you will need to extend the liability portion of your own homeowner's policy.
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