Builders Risk Insurance

[billyj]

Hi Gang
I'm in the process of building a barn in Louisiana. I have my slab poured, embeds set and ready for the guy to start the assembly.
My question is, what does Builders risk cover? I have the gentleman's word that he has insurance. to cover himself but I wonder about the other crew members that he will hire to help.

Any of you ran into this situation before and what type of insurance can I purchase to protect myself?

Any advise would be greatly appreciated

[Old Vet]

I used to work for a state agency and one thing that they needed to get the job was builders insurance. This covers all people that are alowed on the property. You can buy this but most contractors already have this and will provide you with a copy if you ask them.

[fastbackpony]

When we built our house - our contractor had insurance on himself and his people. Any accidents on the job were covered.

We were glad of that, but also (to satisfy our mortgage people and protect us) we got an owners:builders risk policy. not only is your liability issue covered, if materials are stolen, or set on fire, or ruined by snow or rain etc. it is also covered.

Construction sites are notorious for people coming in, in the night or whatever and ripping you off. We were pretty close to the construction site, but it was great peace of mind.

[Randy Rooster]

All contractors at a minimum should have workmans comp and general liability. Ask for your own copy " for your records"

If the guy ever comes back later sueing you you want to have proof he had a policy. Also check with his insurance company to make sure the policy is going to be in force the whole time he is working for you.

[tiogacounty]

Billyj. Hi, there are three different types of insurance being discussed here. I'll give you my experiences with all three based on having been a home builder, employer, and sub-contractor in PA. This may or may not be 100% correct, based on your state laws and, individual insurance policies involved.

1. builder's risk. A policy purchased by the property owner to protect their interest in the structure being built. In my case I would purchase individual policies when building homes that I owned and intended to sell. This provided protection from things like fire, wind damage etc. Similar to a homeowner's policy. In my case, as I learned the hard way, theft of "Loose" material, (delivered but not installed) and theft of tools and equipment, is specifically excluded from this policy.

2. Contractors liability. This is the cheap and easy part of being a contractor. this will provide large amounts of coverage, into the millions, for acts that are specifically the fault of the contractor, worker falls through hole in the floor, plumber starts building on fire etc.... I had over a million in protection for a few hundred a year.

3. Workman's comp. This is the big ugly one. This is required by state law for any employee doing anything in my state. It varys from silly cheap for professions like secretary or ofice worker, to mind blowing expensive for jobs like roofers. A lot of builders, contractors and sub-contractors will do anything to avoid paying this, as following the rules can frequently take them out of the game. It's tough to be a competitive roofer when you are paying $1500/ month per worker for worker's comp. and you competitors are paying less than that (in cash) to keep an illegal migrant working. The problem, as the property owner, is that any serious worker injury exposes you to some risk. If you have contracted with a builder who is not paying workman's comp. insurance and somebody is premanently injured by falling off your roof, you are going to have several years of legal battles and may end up losing everything. If the contractor is properly insured, you will probably be free of any liability. In my experience MANY contractors will tell you that they are "fully insured" but they are really stretching the truth. many will attempt to dodge the oppressive cost of comp. insurance by treating their employees as independent contractors. The problem with this is that the Feds, including the IRS, have a very specific set of conditions that establish a worker to be an independent contractor. In the construction industry, the guys piling out of the company truck in the morning and listening to the orders that the foreman barks, are NOT independent contractors. It doesn't matter what you are told when you are asking your contractor for proof of current and comprehensive insurance, if the courts and the IRS consider his help to be employees, then they are. Chances are you will get through 99.9% of these situations without incident, but when you hire a contractor without valid liability and comp. and something really, really wrong, it turns into a long, ugly, and expensive battle.

BillyJ, hopefully this helps clear up the three types of insurance you need ? Good luck

[Hoop]

Legitimate contractors are NOT the least bit offended to produce copies of their insurance/workmans compensation policies. Fact is, they paid good money for the policies and understand that having these policies separates them from the illegitimate fly by night contractors. The fact that your contractor "gave you his word" he had insurance should have alarms bells clanging.


If one of his workers gets hurt on the premises, and the builder doesn't have workmans compensation, guess who is liable? Thats right....the property owner. If an employee suffers a disabling injury, the financial burden is UNLIMITED.

Nobody should step foot on your property (other than getting quotes) unless you have written documentation in hand. Verbal utterings (Yup, I've got insurance) are completely meaningless.

In the real world it works somewhat like this.
Legitimate contractors have both liability insurance and workmans compensation.
A builders liability policy costs in excess of $1000/year. Workmans compensation is generally a fee that is a percentage of total payroll. For example, every $1000 of payroll means the employer pays $150 (15%) in workmans compensation costs.

Not so legitimate contractors have neither. They probably pay no federal withholding, FICA or state taxes either.

The price difference between hiring a legitimate contractor and Shady Contractors is minimal. Legitimate Contractors Company may bid $15,000 for a job, while Shady Contractors bid $14,000.

If you wish to roll the dice and put your financial resources at unlimitied risk, hire the Shady Contractors. 1000's of people do it every day.

[tiogacounty]

Originally Posted by Hoop

The price difference between hiring a legitimate contractor and Shady Contractors is minimal. Legitimate Contractors Company may bid $15,000 for a job, while Shady Contractors bid $14,000.

.

Well I was reading and agreeing with everything you said until this part. Sorry, but this can be true in some cases, but way off in others. I have a neighbor who has been a very legitimate painting contractor for the last twenty years. He no long can compete in the residential new construction market. He makes a good living repainting homes for homeowners, but no longer bothers with new stuff. The reason? "Shady" contractors are now doing the work for exactly half his square foot pricing. They use illegals, don't pay any legitimate employee related expense, including insurance, social security, or payroll taxes, and make money at 50% of the going rate. The other issue that makes me question your math is areas like roofing and framing. These trades can have comp. ratings in excess of 25%. So a legitimate contractor will have a labor burden that exceeds a "shady" one by 30%, This is often the deal breaker that prevents a legitimate contractor from competing. There are whole trades in this area, where the concept of traditional, legitimate contractors simply don't exist. I would have a long and difficult search to find a landscaper or drywall contractor that could provide proof of comp. insurance for every worker under his control. My only hope would be to find a small "good ole' boy" outfit, where the family worked as a group, other than that I don't know of anybody who it 100% legit.