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Uninsured vs Insured Contractors: What You Need to Know

a construction worker

At certain points in the life of a homeowner, the roof is going to need fixing, the kitchen can use some remodeling, or parts of the plumbing will have to be replaced. Whatever the job is, homeowners are going to need to hire contractors to address them.

These days, however, hiring contractors for any job is no longer as easy as you think. So many of them are competing for projects out there, and that makes choosing the right one trickier. Ideally, we all should be hiring contractors who have the proper licenses and insurance policies. However, uninsured contractors are complicating things and are, to a certain extent, finding success in convincing homeowners to go for their services despite the apparent risks.

Let’s take a look at what uninsured contractors offer and compare them to what those with the right contractors insurance bring to the table.

Rates

Since uninsured contractors don’t have the burden of paying for contractors insurance premiums, they typically have the luxury of offering much cheaper rates for their services. The comparatively low prices they charge are the biggest reason many homeowners are tempted to hire them for jobs.

Unfortunately for uninsured contractors, the low rates they offer are pretty much the only thing they have going for them.

Liability for damages

Most, if not all, contracting jobs involve a certain amount of risk. Roofing contractors, for example, face the risk of falling from a certain height and injuring themselves or someone on the ground. A tool that slips off their hand can also hurt someone else, or cause property damage.

If you hire a contractor with worker’s compensation insurance, then any of his or her workers who suffer an injury or even a fatal accident on the job will be covered. And if the contractor has general liability insurance, then any personal injury or property damage his workers may cause, unintentionally or otherwise, will be paid for by the contractors insurance company.

If your contractor doesn’t have the right insurance policy, you, the homeowner, will, in effect, become the contractor/employer and will be liable for anything untoward that could happen on the job site. That means you will have to pay for the hospitalization and medical expenses of anyone who suffers an injury on the job, as well as any property damage.

By steering clear of uninsured contractors and hiring only insured ones, you are protecting yourself from the liabilities that may pop up in the course of the project.

Credibility

More often than not, uninsured contractors are also unlicensed ones, since contractors insurance is typically a requirement for obtaining a license to operate as a contractor in most states. A license, of course, is proof that a contractor is legitimate, and therefore has the qualifications necessary to perform a job with quality results. It’s also an indication of a contractor’s willingness to be held accountable for his work. After all, you can always file a complaint against a licensed contractor who does sloppy work.

Uninsured contractors, on the other hand, are more than likely not legitimately qualified to do the contracting job for which you hired them. Without a license to lose, they can also just up and leave even if you have complaints about the quality of their work.

Long-term costs

As mentioned earlier, uninsured contractors tend to charge cheaper rates compared to those with all the necessary insurance policies. That, however, doesn’t automatically mean your costs are going to be lower in the long term.

Let’s say that you saved some money hiring a roofing contractor who doesn’t have insurance. A couple of weeks after supposedly fixing your roof, a heavy storm renders all that work useless as rainwater leaks right through your ceiling and into your living room. In all likelihood, the uninsured and unlicensed contractor who worked on your roof will have been long gone by now. Even if you do manage to locate and contact that contractor, you probably won’t be able to compel him to redo your roof without paying more.

You may have saved some money in the beginning, but the presumably low quality of an uninsured and unlicensed contractor’s work will have you spending more correcting it in the long run.

Insured and licensed contractors, on the other hand, will always see to it that everything they do is of top quality because they know what’s at stake: their reputation and their license to operate.

Code compliance

Insured and licensed contractors typically keep up with local building codes. That means local councils and homeowner’s associations aren’t likely to ask you to tear down, say, a house extension they worked on because it will be code-compliant. There is no assurance that the same thing will happen if an uninsured and unlicensed contractor built that same house extension.

Always hire insured contractors

Save for the lower rates, uninsured contractors cannot compare to insured ones. So if you ever have a project that needs a contractor’s expertise, always go for those with the right contractors insurance.

In general, the contractors you hire must have workers compensation and general liability insurance at the very least. When a contractor you’re interviewing for a job says he’s insured, you should not just take his word for it. Always ask for proof of insurance, because qualified contractors won’t hesitate to show you documents that prove they are, indeed, insured and therefore legitimate.

 

Rachel Porter is the content specialist for Custom Contractors Insurance, LLC, an Arizona roofing and contractors insurance company. When not writing, she enjoys reading and mountain biking with her friends.

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