5 Remodeling Insurance Myths Than Can Bite You

Rachel Strong

Rachel Strong

October 18, 2018

We find that most remodeling customers don’t realize the importance that insurance has in the remodeling industry. We want to provide you with information so you can understand what your contractors insurance covers, and why they need it. Here are our top five myths regarding insurance, and and how they could affect your project.

1. Insurance guarantees work

It’s extremely rare that any insurance policy is going to cover bad workmanship. Insurance typically covers catastrophes like your house burning down, or any injuries to trades working in your house. Typically, the only way to fix bad quality work is to put pressure on your contractor or sue them in court, but in reality it’s very hard to prove a legal case on what “good craftsmanship” means.

2. I don’t need insurance

Another myth. If you go find labor yourself and don’t have worker’s compensation insurance, you are taking a massive risk and may be breaking the law. Worker’s compensation insurance covers medical costs and lost wages due to injury for trades working on a remodel. In California and other states, you are judged to be a trade’s employer if they work in your house for more than around a day, so if you picked them up from the Home Depot car park and don’t have worker’s compensation insurance, you are liable if they get injured and you are breaking the law. Worker’s compensation insurance is expensive, more so in some states than others, because trades get injured far more often in remodeling than professionals do in office jobs (where there are no power tools).

3. My property insurance will cover it

Broadly speaking, this is not true. The vast majority of home insurance policies have disclaimers for remodeling work. A construction attorney in Austin gave us a case where they called up a customer’s property insurer on his behalf, and the call center initially said they would cover injuries to trades in the remodel. When the attorney asked for it in writing, the eventual answer was “no, in fact, it’s not covered” – so always get it in writing. The attorney then organized an umbrella insurance policy for the client, just in case one of the contractors or subcontractors turned out not to have the right insurance.

4. He said he had it, so it must be true

Never trust a general contractor at his word. It’s a sad fact, but insurance for remodeling can be so expensive, general contractors sometimes succumb to the temptation and cancel their insurance contracts to be able to pay other bills. Even if the general contractor has an insurance certificate with valid dates on it, it is still worth calling up the insurer and checking that the insurance policy is still active.

5. Insurance is cheap

It isn’t. Worker’s compensation in remodeling is calculated as a percentage of net labor cost, and it varies from 5% or so on the low end to an incredible 70% for roofers in California. So if a guy doing roofing is earning $20 an hour, the roofing contractor is paying $14 to the worker’s compensation insurer – which may be private or state run depending on the state. Some less scrupulous contractors will attempt to set up every worker as an independent contractor responsible for his/her own insurance, most of them then don’t get any. That sounds clever, until you arrive at the hospital with a guy who just fell of your roof and discover that he has no healthcare insurance or worker’s compensation coverage and you have to decide whether to give your own credit card number.

At Bamboo, we have insurance policies across our platforms, and provide insurance for all of the Pros that work with us. We also have our own work quality guarantee, which is a standard part of all our contracts. This is why we micro-manage quality on our projects – we don’t want to be redoing work.

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“Working with Bamboo App on our remodel project has been a breathe of fresh air. The use of technology to facilitate the project moving forward while also giving the homeowner oversight into the scope of work, timeline and budget is a true revelation for the industry.

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August 18, 2018

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