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The Right Way To Verify Contractor Insurance
11/13/08 15:05 , Categories: Articles First, before I begin, I want to stress that only a very, very small percentage of contractors are responsible for forcing us to use systems like what I am about to describe. Unfortunately, it is necessary to check to make sure that a contractor's insurance is still valid and in force to limit your liability when they do work for you. The overwhelming majority of contractors are great, honest, hard-working folks. The system I am about to share will weed out the few bad seeds and even help you find the occasional forgetful or unintentionally uninsured contractor.
Some investors think the right way to check to see if a contractor is insured is to
Follow up:
ask to see their insurance card/sheet. Once the investor looks at that card and sees that it says they are insured through the work period they think that they are all good. While 9 times out of 10, you'll probably be fine, I'm not sure I'd like to risk possibly hundreds of thousands of dollars or more in liability on those odds. So here is how you should check a contractor's insurance.
Ask them to provide you with their proof of insurance card/sheet and preferably get a copy. If you can't get a copy, write down the insurance company's information, the contractor's information and especially their policy number. Then, instead of just calling the number of the insurance company from the card, use your phone book or another third party source to get the number of the insurance company. Why go through the trouble? It's the same reason that many schools now call the parent's phone number on record when a child brings in a sick or tardy note from home and not the number on the note.
Once you call the insurance company, check to make sure their policy is paid up and that they are covered through the period that you are having them do work for you. Your potential contractor could have been on a payment plan, made their first payment but somehow their subsequent payments may not have made it to the insurance company. So, they might have had insurance info that showed they were insured, but since a later payment was not received, they really are NOT insured.
Also, make sure that they are insured for the type of job they are doing. Insurance policies differ and you want to make sure you understand what they are insured for and what they are not. Better to know up front than to find out later in a much more unpleasant way.
In summary, you'll find that more often than not, this will be an exercise in verifying what you already knew, but in that rare case when you find out that it is not exactly what you expected, it makes the practice completely worthwhile.
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24 comments
Comment from: Vince Nowak dba NoCor Enterprises [Visitor]
This is exactly right. When i give an estimate i always write in my insurance agents name and number so the prospect can call and verify as they should.
11/14/08 @ 11:31
Comment from: Russ B /NHSPM [Visitor]
All any cust has to do is ask for a certificate of Insurance from the contractor this will be mailed from the insurance agent or faxed with the property owners name and the amounts of Insurance carried by the contractor
Calling the insurance co means nothing (you must have this certificate to be sure the contractor has Insurance0
we always have a certificate sent to every cust on every job no matter what the size
as far as I am concerned if your Contractor dose not offer this to you BEWARE
Calling the insurance co means nothing (you must have this certificate to be sure the contractor has Insurance0
we always have a certificate sent to every cust on every job no matter what the size
as far as I am concerned if your Contractor dose not offer this to you BEWARE
11/14/08 @ 12:40
Comment from: mike simone [Visitor] · http://skyconstruction.blogspot.com/
To have a license in New Jersey you have to have insurance.I like the first comment i will start doing the same.
11/14/08 @ 13:11
Comment from: stan [Visitor] · http://yardleisure.com
I just get my insurance company to issue "riders" in those the client gets a letter from the insurance conmpany telling them that the property is covered for my kind of work.
All contractor customers should ask for a rider, it costs nothing, and to me justifies my agents fees.
All contractor customers should ask for a rider, it costs nothing, and to me justifies my agents fees.
11/14/08 @ 14:50
Comment from: Don Kosnik [Visitor]
My insurance company will issue 'certs'(insurance certificates) immediately after I call them with the clients fax # or mailing address. I carry a $1,000,000 liability policy with a $1,000,000 'umbrella'.
11/14/08 @ 16:16
Comment from: Rob L [Visitor] · http://www.dna-renovations.com
I typically have my customers listed on my policy during the course of the job as a "2nd insured". This doesnt carry any additional fees, but provides the customer with added piece of mind. It also provides proof of insurance as the customer will recieve a copy of the policy in the mail.
11/14/08 @ 16:53
Comment from: Steven Williams [Visitor] 
I do like the ideas that I have read. I carry 1,000,000 also and will also start listing the customer as 2nd insured as added security.
Thanks,
Steven
Thanks,
Steven
11/14/08 @ 20:41
Comment from: Jim Herbert dba Quality Services [Visitor]
It has been my practice to call and have a certificate faxed or mailed to potential customer, this removes all doubt and lets the customer know the limatations of my insurance. I see no need to carry a copy around with me.
11/15/08 @ 09:06
Comment from: Lance Herschell [Visitor] · http://landhconstructionlance.com
In Topeka KS in order to get our permit you must have insurance the policy number and phone number are printed on the permit. I also have my agent fax or e-mail proof to the customer with the name of the job on the proof
11/15/08 @ 16:31
Just started a renovation company,
How much what kind of insurance do I need ?
Thanks
How much what kind of insurance do I need ?
Thanks
11/17/08 @ 07:18
Comment from: Jesse Solis [Visitor]
As a painter, i do not need a permit/or lic's. And as far insurance goes, i don't carry it.I work by word of other customer's, and i give ref's as well. I only get insurance if they really request it and only for that one job to make the customer happy. Other than that i just give a bid an if i get the job then i start. This has worked for me in the last 10yrs or so, and if i move to another state. Then i'll get some insurance and lic's because thats required.
11/18/08 @ 05:36
Comment from: Walter j [Visitor]
One of the best ways for proof of insurance is to have the contractors insurance company provide the investor with a certificate of insurance.
11/18/08 @ 07:40
Comment from: John J Grott [Visitor] · http://ct.local.yahoo.biz/jjgdesigns/
With regards to your presentation James, the information is accurate people should be informed of the necessities of insurance and the means of verifying it. My concern is the inclusion of the fear aspect to your advice. our industry has a long standing stigma of dishonesty and poor workmanship, this we all know. And personally I work very hard at addressing this in my contributions to the industry. When I address the issue of insurance I personally take the proactive approach and provide at the time of estimating, my business information ,with contact options and license numbers, as well as the contact information for my insurance agent who is always happy to verify my insurance. Then at the signing of the contract I supply the client with an insurance binder in their name with the location of their project. this has been standard practice for me in CT, CO (western), and FL for over 14yrs. My point is That I don’t believe its necessary to "fear" people into their due diligences with examples of shoddy and shifty business practices. If we are really to overcome the stigma associated with this industry, as a product of revamping it needs to adopt a less defensive posture and take on a more responsible proactive one. And than means not just here in the industry, but also on the side of the consumer. Its very easy for most consumers to do a portion of their homework which generally seems to include attaining multiple bids, but when they either don’t follow thru with the remainder of the process or waive it in lieu of a lesser quote, we all find ourselves listening to yet another 6 O’clock news report of a customer getting ripped off. Lets be proactive with our industry and promote it positively on both sides of the fence. I may be going out on a limb here but I will venture to say that the majority of the people that we are fighting the stigma of, are not here. And if they are, lets try and get them on this side of the fence with a preventive, rather than a defensive posture. After all those who don’t have Insurance clearly don’t understand the importance of having it, not just for themselves but for the customers they serve as well.
11/18/08 @ 11:36
Comment from: Glen Day [Visitor] · http://www.coastalhomerepair.com
If any customer wants proof of insurance I simply contact my agent and give him the customers contact info and have him send a certificate of insurance to them. It provides all the necessary info the customer wants so they can feel secure in hiring me.If you can do this you will get the job 99% of the time. Most of my business is referral or repeat business so I hardly ever need to provide it, mostly on new prospects.It goes a long way on credibility w/cust and my agent is glad to provide it.
11/18/08 @ 13:31
Comment from: steve [Visitor]
In oregon you can check on a contractors insurance and bond to make sure its active through the states ccb web site, insurance companys are required to notify them if ther is a lapse and I pay it yearly. Also were required as contractors to give this information to potential customers so they have the information on how to check on a licensed contractor.Seems alot easier then calling ones insurance company and like there gonna give you any information without there clients permission.
11/19/08 @ 09:30
Comment from: Jerry Reynolds [Visitor] · http://1handyman4u.blogspot.com/
John Grott says it very well. Never had a problem providing my customers with proof of insurance. I use a local company, pay it in full. $1,000,000 coverage. Seems like you are making a issue of this. A local phone call tells them I am insured, and I have not had anyone ask for more.
Jerry
Jerry
11/19/08 @ 19:18
In Texas, contractors have to have insurance to pull permits and have to be a member of TRCC for jobs over $10,000.00. If you need proof of insurance for a job, you can request their insurance company issue a certificate of insurance. Most major Texas cities require this certificate in order to pull permits. As an individual, the certificate could be issued in your name. A contractor may require an additional fee for this certificate due to it costing money, usually around $20. An insurance company will not issue this certificate if the contractors insuarance is not currant. In addition to the certificate, you could also get a copy of their policy decleration page so you know their limits of liability.
11/27/08 @ 18:48
Comment from: Mitchell Lampe [Visitor]
James when a customer wants proof of Ins I just call my agent with the info like the address of where the work will be performed exc... and that shows it all. I also would like to know just what I should be doing to help me get calls from your investors? I am in Atlanta. I think you have addressed this before some but I am not that good on the computer and need this better explained to the people that are trying to help me. Thanks for all your help! and support! It is great and helpful.
12/03/08 @ 17:02
Comment from: Joseph Walling [Visitor]
I live in Delaware where insurance laws are pretty strict. When a customer asks for proof of insurance, almost all companies will issue either you or the customer a "certificate of insurance". It's quick, simple and fulproof. I do want to add that in over 15 years in the field, insurance has been a complete loss for me. I once broke $12.00 lamp in a childs room and deducted $50.00 from the customers bil to compensate him.
12/06/08 @ 21:39
For licensed contractor work. Getting insurance information is probably a pretty good idea. Are there any small contrctors left these days? That's what I thought.
For handyman work it is somewhat of a non-sequitor.
Most of the work I have been doing lately is PM and shutdown work. There isn't a homeowner perse, not like before, now it is a management company or a bank agent since most of the homes are either abandoned or foreclosed. Most agents I have been dealing with are more interested in whether you are bonded or not. They don't understand that the $3000 flat screen TV in the home is pretty much worthless. Since Wal-Mart can't sell the same one for $729. They really don't have to worry about someone stealing it since there is no market for it. Single owner occupied homes are usually extremely grateful just to have someone who still can answer the phone show up.
I repaired a deck the other week for a gentleman. He wanted to see my insurance and he wanted my insurance information. I told him "no, go call someone else." He said "There is no one else to call", I said, "ok, so what happened here?" He told me they had a party a few days ago and things got somewhat out of hand. I replaced the broken timbers of the deck railing. I somewhat overbuilt it with nuts and bolts instead of deck screws and guyed the rest of the deck for support. He was very satisfied. Paid in cash and has referred others to me.
For handyman work it is somewhat of a non-sequitor.
Most of the work I have been doing lately is PM and shutdown work. There isn't a homeowner perse, not like before, now it is a management company or a bank agent since most of the homes are either abandoned or foreclosed. Most agents I have been dealing with are more interested in whether you are bonded or not. They don't understand that the $3000 flat screen TV in the home is pretty much worthless. Since Wal-Mart can't sell the same one for $729. They really don't have to worry about someone stealing it since there is no market for it. Single owner occupied homes are usually extremely grateful just to have someone who still can answer the phone show up.
I repaired a deck the other week for a gentleman. He wanted to see my insurance and he wanted my insurance information. I told him "no, go call someone else." He said "There is no one else to call", I said, "ok, so what happened here?" He told me they had a party a few days ago and things got somewhat out of hand. I replaced the broken timbers of the deck railing. I somewhat overbuilt it with nuts and bolts instead of deck screws and guyed the rest of the deck for support. He was very satisfied. Paid in cash and has referred others to me.
12/10/08 @ 11:21
I carry Insurance and any potential client is welcome to research it, and I always call my Insurance and ask them to fax a copy of my insurance to my clients, therefore everything is on the ups and we get on with what has to be done.
12/18/08 @ 13:50
Peace of mind is my greatest concern for a customer, without that your job will go south quickly. When I sign a job or set up a handyman account with an investor, I have all of the information to send them a hard copy of my Declaration page with them listed as the certificate holder. In the event my insurance is cancelled for any reason they are notified by th insurance company. I have it emailed to save time, but they also get a hard copy mailed to them for their records. This puts them at ease and sees that I truly am concerned with their concerns.
12/28/08 @ 18:49
Comment from: stephen maniaci [Visitor]
Good idea, however most states require insurance and bond, if it laps your license is suspended
01/04/09 @ 10:36
Comment from: Kirk Frederick w/ Frederick Contracting [Visitor] · http://fchomeimprovements.blogspot.com
· http://fchomeimprovements.blogspot.com
As a contractor since 1991, keeping insurance up to date isn't very hard. I do find that the "under cutters" have a tenancy of practicing faulty insurance practices. Experiencing this by hiring certain sub-contractors. Relaxed now seeing nothing ever bad became of it. However,, It is wise to get your contractor have their insurance information sent directly to you by the insurance company. Fraud is quite punishable by law, whether the work is completed or not. All in all it's just good practice to follow this first step. I am in complete agreement with the second step as well, A simple call to the insurance provider out of a phone book or via 411, will most certainly avoid having to deal with any uncertainties. After all, your just trying to get the work done and get through the expenses. Who needs another headache? It's just good business to watch your steps and don't cut corners.
01/05/09 @ 10:01
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