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Don't Build Risks Into Your Home Makeover Project

Major home remodeling and construction projects can open a Pandora's Box of risks for you and your family. Be sure you consider all of the pitfalls in your path before you begin.

"One of our clients called us after they had torn down their house to request builder's risk coverage on the property," says Kathy Rumble at HUB International Ontario Limited. Instead, the personal lines insurer cancelled the client's policy for material change in risk and, as required by law, sent notice to the bank. The bank then began foreclosure proceedings.

Moral of the story: Check with your insurer and bank before beginning major home renovations.  

Start by selecting a reliable, professional remodeling contractor. A home improvement contractor with a well-established business can be vetted through references from past customers or through your local Better Business Bureau. If you solicit bids from several home improvement contractors, be sure they are all bidding on the same scope and quality of work. Discuss variation in bids and beware of any bid that is substantially lower than the others.

Contract Is Critical 

A well-written contract is a critical next step in any home remodeling project, according to the National Association of the Remodeling Industry (NARI). According to NARI experts, the contract is the one item that holds the job together and ensures that all parties involved agree to the same vision and scope for the project.

Among other things, your contract should include:

  • What the contractor will - and will not - do.
  • A detailed list of materials for the project.
  • Approximate start and completion dates.
  • Financial terms, including total price, payment schedule and cancellation penalty.
  • A minimum one-year warranty on materials and workmanship.
  • A binding arbitration clause in the event of a disagreement. 

NARI also advises that you take steps to protect yourself in case someone has an accident while working on your home. Ask to see a copy of the contractor's certificate of insurance. Most states require a contractor to carry worker's compensation, property damage and personal liability insurance. Have your HUB broker review the contractor's certificate of insurance to make sure it meets minimum requirements.

In addition:

If you hire a general contractor, one of his or her responsibilities should be making sure that all subcontractors provide a certificate of insurance.

  • If your agreement states that your contractor name you as an additional insured, your certificate should include this language.
  • If the construction project extends past the expiration date of the policies, you should receive an updated certificate.

 For more helpful information on selecting and working with a remodeling contractor, visit the NARI website.

Do a Review 

As an extra precaution before you sign a contract, ask your HUB broker and an attorney to review it. Most contracts include an insurance provision that outlines your responsibility as well as what is required of your contractor. A legal review will help you avoid any contractual transfer of liability or performance requirements that do not meet your objectives.

You should also discuss with your HUB broker how the changes you are making will affect the insurance coverage that you have on your home. Your broker will review the valuation clause on your policy to determine what your property limit needs to be in order to avoid any coverage gaps.

Once work is complete, your HUB broker can review the contents coverage on your home to determine if it needs to be updated. Did your makeover include any custom built-ins or fixtures that should be added to a schedule of valuable articles? Also, is the property limit on your home accurate and does it reflect your home's increased value? If you installed a feature such as a pool, spa or hot tub, is your liability limit adequate?

With preparation and planning, you can avoid the risks and problems that can occur as part of a home renovation project. Doing this work in advance is the best way to ensure that your makeover goes smoothly and that you enjoy the home improvements you've made.