Construction season is at different times of the year for different parts of the country, but in Texas (specifically southeast Texas) it's October. Within the last month I've had two friends and four clients who have started construction projects for a new home or renovations on an existing home. So let's address these two situations separately because for risk management and insurance purposes they will be handled that way.
First, let's start with new homes. You're looking for a contractor that you can trust. How do you know they're good? How do you know they are properly covered?
1) Ask them for recommendations. Most contractors, especially if they're good, will have clients who can or have provided them with a recommendation, just as you would see with a job interview process.
2) Request to drive past another job site if they have one. This way you can see what the quality of the work is while it's in progress.
Have they left tools out overnight?
If the site's unattended, did they leave windows open?
If work is being done, are proper safety measures being taken?
Are the workers wearing gloves while stapling?
Is there someone holding the ladder while another person climbs to the roof?
Where is paint or stain stored when it's not being used? (This is a huge fire hazard. I personally have see a situation where the house was almost complete but due to poor storage of paint in the garage, the entire home burned down.)
3) Ask to see certificates of liability insurance providing accurate limits and waivers of subrogation. The accurate limits speaks for itself, but what is a "waiver of subrogation"? According to Investopedia, a waiver of subrogation "prohibits the insurer from attempting to seek restitution from a third party who causes any kind of loss to the insured." And now a translation, if there's a loss (typically liability loss) while the home is being constructed, the general liability insurer will not look to the homeowner for payment of the claim, rather the insurance company will pay the claim. This protects you if the builder or insurance company seems to think you're at fault for whatever reason.
4) Do a "Google" search of the company. A lot of times you can find reviews online and while some may not be valid and most may be negative, this can give you a better idea of any issues they have had in the past. I don't recommend leaving it at that though. Ask the contractor about it, why they had these issues and what they have done to avoid them moving forward. Issues are going to happen and the true character of a company will show through in how they dealt with it.
5) Make sure you have a builder's risk or course of construction policy in place. I'm not going to go into the differences between those policies at this time, but you are able to secure this coverage through the builder or you may even be able to do so through your insurance broker.
(One note to protect yourself if you have a builder's risk policy, if you start moving ANY personal property in the home - a couch, a bed, a lamp, etc. - the insurance contract from a builder's risk policy I voided and the insurance company will not pay the claim. Make sure the day you begin to move anything in you have a homeowners policy in place.)
Now let's look at updates to an existing home. What should you consider? Obviously all the information above applies in this situation as well, but there are a couple of other things you should consider.
1) If you are living in a portion of the home during construction, make sure you keep your doors to that portion of the home locked and your alarms active. While you hope you can trust the workers who are updating your home, I recently had a client who had a significant amount of jewelry stolen from a construction worker doing updates. Additionally, you want to be sure if there is a fire in the portion you're living in the alarm sounds so you're able to get out safely.
2) Regardless of how much or little work you're doing, talk it through with your insurance broker. If your just painting or updating a room, they'll likely tell you that your policy is okay, but if you're adding square footage, moving walls or making structural changes, they'll likely have to notify the underwriter for approval. If you don't talk to your broker and there's a loss, it's very possible the insurance company could deny to pay the claim. So then you've been writing checks for nothing and no one likes that!
3) Once construction is completed, review your homeowners dwelling limit shown on the insurance policy. It's likely that it needs to be adjusted. Most companies can help you out with this. This is a very important step because a lot of the carriers will require your home to be insured for at least 80% to value to avoid any penalties if there's a loss by something called a coinsurance clause.
Now that you've got an idea of a couple items to consider, get to work! Your hose isn't going to build or repair itself!
As always, please share your thoughts and comments. Happy construction season southeast Texas!
Some information sourced from
http://onswipe.investopedia.com/investopedia/#!/entry/,5228a3d9da27f5d9d0177eb2
Photo curtesy of
http://adamcowherdconstruction.com/services/home-builders-springfield-mo/
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