You’ve wanted to renovate your cramped, outdated kitchen for ages. Or perhaps you are deciding between staying in your home after major damages or selling and walking away from some potential pricey repairs. Like many, asking around among friends and co-workers may initially help find and hire a contractor, but making sure your contractor is insured in New Jersey is of vital importance.
Things can get ugly – and appallingly expensive – if your contractor isn’t insured. If things don’t go perfectly, you can land in a world of drawn out disputes, expensive fixes you have to foot the bill for, and far more stress than you initially bargained for. You can avoid such a situation, however, by making sure your contractor is reputable and fully insured.
Difference Between Bonding and Insurance
Most reputable contractors advertise themselves as “bonded and insured.” But what, exactly, does that mean?
A surety bond assures that you’re protected if the contractor skips out and doesn’t finish the project or if he winds up doing sub-par, shoddy work. This bonding ensures that you won’t have to use your own cash or homeowner’s insurance to foot the bill in such cases. It’s essentially a financial guarantee that the contractor will meet the terms of the agreement—or a third-party bonding company will step in to make it right.
A contractor’s insurance protects you against the cost of both damages and lawsuits. If during the renovation project, some kind of damage occurs to your home, you (or your insurer) won’t have to pay for repairs. Also, if one of the contractor’s employees is injured working on your project, you won’t be liable. This coverage typically includes both general liability insurance and workers’ compensation—two vital protections that shield you from unexpected expenses and potential legal trouble.
Before hiring anyone, it’s a good idea to ask for proof of both bonding and insurance. Don’t just take their word for it—request documentation and verify it if needed. Choosing a contractor who is both bonded and insured not only protects your investment but also shows you’re working with someone who takes their business—and your project—seriously. It’s a small step that can save you major headaches down the road.
What Kind/How Much Insurance?
Taking steps to make sure your contractor is insured in New Jersey is just the beginning. You also need to make sure the contractor has adequate coverage and the right types of insurance. Just having a policy isn’t enough—it needs to match the scope and scale of your project to offer true peace of mind.
First, would the contractor’s insurance cover major damage to your home? If, say, you live in a $1.5 million home, and your contractor’s insurance would cover only $500,000 in damages, then you probably need to keep looking. Underinsured contractors can leave you financially vulnerable if something goes seriously wrong. It’s not just about having insurance—it’s about having the right amount of coverage to match the risk.
Your contractor should carry general contractor liability insurance comprising the following types/levels of coverage:
- Liability insurance – Covers injury to you or your family and protects you from lawsuits
- Workman’s Comp – Protection for the contractor’s employees in the event of injury (not required in all states for smaller contractors, so you’ll need to ask)
- Property damage – Covers damages to your home during the course of the project
In addition to these basics, it’s worth asking if your contractor holds additional endorsements, such as tools and equipment coverage or completed operations coverage. These extras show a level of professionalism and preparedness. Always ask for a certificate of insurance, and don’t hesitate to contact the issuing agency to verify it’s current. When you’re investing in a major renovation or repair, protecting yourself legally and financially should never be an afterthought.
Steps You Need to Take
But how, precisely, can you make sure your contractor is insured in New Jersey? There are several steps you can take mitigate your risk and make sure you’ve chosen a reputable, fully insured contractor.
- Check out the contractor with the Better Business Bureau
- Check references and talk to former customers
- Have a formal in-depth meeting with the contractor before signing any contract
- Ask to see insurance and bonding documents
- Get everything in writing – all aspects of work to be done, work milestones and payment schedule, completion date, contingency clauses, and so on
How Does Your Contractor Deal With Subcontractors?
Suppose, for example, your remodel project involves adding a room to your home. In that case, the general contractor will probably hire subcontractors to do the framing and brick laying. But are the subcontractors insured?
It sometimes happens that subcontractors are brought in on a cash basis. There’s no record of their employment by the general contractor, and, as a result, they aren’t covered by the contractor’s insurance (or bonding) should something go wrong. So, in addition to investigating your contractor’s insurance status, you also need to determine how they deal with subcontractors.
Knowing how to make sure your contractor is insured in New Jersey is crucial for any major work done in or on your home. Your local real estate professionals can also be a good resource when you’re checking out contractors.
If you’re still feeling overwhelmed and want to walk through all of your options, we would be glad to assist you! Feel free to contact us by phone at (908) 320-7995 or fill out our contact form to get in touch.