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Insurance – What You Should Know and Look For

I am not an insurance expert and the following is based on my own understanding of what you should know and look for. You should consult with a licensed insurance professional if you have any questions.

Your builder should at least have current general liability insurance. Always ask for a Certificate of Liability Insurance, but don’t accept just a copy. Request an original from their agent on an approved ACORD form as confirmation. The ACORD form will show who the producer (Agency) is; who the insured is, (this should be the name of the builder with their address); it will also provide the policy number, the effective date and expiration dates of the policy, and the limits of the policy. $1,000,000.00 seems to be the industry standard minimum limit of liability.

The ACORD form will also show if they have Workers Compensation insurance. In the state of Texas a builder or subcontractor is not required to carry Workers Compensation insurance however, it is recommended. If they do not have Workers Compensation insurance you should contact the Texas Department of Insurance Division of Workers Compensation and request the correct form that provides a waiver from the builder, their employees or subcontractors so that they cannot file a claim against you if a worker is injured on your project.

A professional builder should not only have the proper insurance and limits, they should also make their subcontractors have proper insurance and maintain documentation that they do, including any appropriate waivers.

The ACORD form should also list you as the certificate holder and you may also want to request that you be listed as additional insured. You may also want to have it include a hold harmless clause in your favor. Check with your insurance professional and also ask about claims made versus occurrence. Occurrence seems to be the preferred but I’m not sure why.

By the way, the reason you don’t want to accept just a copy of an insurance certificate is that some of the less than professional folks out there will make a down payment on an insurance policy, copy the certificate, and then cancel the policy. You may think they have insurance but they don’t! What will you do if there is a problem and they don’t really have any insurance to cover the problem? Getting the original from the agent is the best way of knowing if they have current and in-force insurance.

If you are planning on building a new home, our article on “Site Selection and the Pit Falls” may be of interest.

Bruce A. Sommers, President