What Does Fully Insured Mean Anyway?

A Guide to Ensuring You Are Protected During Your Next Home Improvement Project.

We’ve all heard the words “Fully Insured” before and seen them posted on service company websites, in ads, and on sales brochures. But what does it actually mean? This was a question I was asked recently.

With over 20 years in the remodeling/building industry, Hogan Design & Construction has learned a lot about 

• the most important policies every contractor should have to protect themselves and their clients, 
• the amount of coverage they should carry, 
• and some other nice-to-haves depending on a specific project. 

Below, we outline the different policies you will want to ask about as you move forward with your next home remodeling or building project, and what answers to look for when interviewing potential contractors or design-build firms for the job.

Types of Insurance Policies & Coverage to Look for in a Contractor

Home remodeling/building is not a cheap undertaking and no one wants to add the additional costs associated with accidents and incidents that may occur. If something were to happen while the company is working at your home, you could see your project costs go up and, in some cases, even be held liable. 

General Liability insurance

From a client perspective, General Liability insurance covers costs associated with customer injury and property damage while the project is under construction. Additionally, the contractor’s policy should include products-completed operations coverage. This ensures you are protected if someone gets hurt, due to faulty workmanship, after the project is done.

We recommend that you look for a contractor that is covered up to at least $1,000,000 by its policy. Anything less may result in large out of pocket expenses that were not part of your budget if something were to happen.

Also please note, General Liability insurance only covers property damage and customer injury. What about if a worker or subcontractor gets hurt while working on your project?

Workers Compensation insurance

Workers Comp is a necessity for any contractor and subcontractor. It covers medical costs and lost wages of a worker that is harmed while on the job. If the contractor does not carry it, the injured person may decide to sue and you could be found liable.

Commercial Auto or Hired & Non-owned Auto (HNOA) insurance

What about the vehicles employees are driving? If something happens involving the car while working on your home, could you be involved in a lawsuit and possibly held liable?

Commercial Auto insurance protects company vehicles & drivers from accidents, vandalism, theft, and weather damage. If workers are using company trucks, ensure that they are covered. 

Moreover, although employees who use their own vehicles may have their own car insurance, it does not mean they are covered if they are on the job when the accident happens. An HNOA policy covers costs of non-company owned cars and drivers being used for business purposes. 

Similar to General Liability, a policy that covers at least up to $1,000,000 should put your mind at ease.

Contractor's Tools & Equipment insurance

Just the other week in our neighborhood, a plumber was working on a job when his truck was broken into, and unfortunately, his tools and equipment vanished. What started as a day to get things done, turned into days of delay, focused on police reports and witness accounts. 

Contractor’s Tools & Equipment insurance protects against damage, vandalism, and theft of contractor equipment. At Hogan Design & Construction we understand the expense and time delays associated with damaged and lost/stolen tools. Having this additional insurance allows us to quickly replace any equipment and prevent those costs from coming back to you through increased labor rates or service charges to offset the losses.

Builder's Risk insurance

An additional nice-to-have, on larger jobs, that we often recommend is Builder’s Risk insurance. As mentioned earlier, job sites are often places for opportunists and vandals. Unfortunately, supplies can go missing and vandalism of sites occurs regularly. Additionally, unintentional things can go wrong. 

Builder’s Risk insurance covers the cost of damage done to a structure while under construction including fire, vandalism, weather, and theft. It ultimately protects the builder and homeowner against costs associated with anything that happens to their home while work is being done - if copper wire or cedar boards go missing, you are covered. No additional costs will be added to your project because something gets damaged or goes missing. 

Contractors that have more than one employee are required in the state of Illinois to carry Workers Comp and Commercial Auto for any company vehicle. Due to the nature of the business, it is in your best interest to ensure that the company you choose carries General Liability insurance.  If the contractor you are considering cannot supply you with proper licensure for their business by the county and state AND proof of the aforementioned insurance documentation, they are not following state law and may not be on the up and up. Be sure to protect yourselves and your home before you start the work. Go with a truly, fully insured contractor.

Your Question Checklist to Ensure You’re Protected Before You Begin Your Renovations

Now that you are familiarized with the types of insurance to look for, we wanted to create an easy checklist of questions to have answered before you move forward with your project. Take these to your initial meetings with contractors to ensure you don’t forget to cover anything, and to ultimately help you with your decision-making process.

1. What type of insurance policies do you carry? If they do not have liability, workers comp, and auto, they are probably not completely above board.
2. Can you provide me with a copy of your policies and licensure by the county/state? If they have it, they should be able to produce the documents before contracts are signed.
3. What is covered under each policy and up to how much? Look for at least $1,000,000 or more for each, liability and auto, to give you some peace of mind.
4. Who will be working on my project? Are all employees covered under your workers’ comp and auto? Full-time & part-time?
5. Are your employees driving company cars or their own? If they are driving their own, do you have an HNOA policy?
6. Are subcontractors covered by your policies? If not, how can you guarantee that I will be covered when they are working on my project?
7. Do you carry Contractor’s Tool & Equipment Insurance? What items might not be covered if something were to happen? (i.e. Do you use rental equipment and is it covered?) Are subcontractors equipment and tools covered too?
8. Do you carry or recommend Builder’s Risk Insurance for my job? Why? 

The term “Fully Insured” can mean a lot of things to a lot of people. For some contractors that could just be having minimum coverage liability insurance. For others, it could just be meeting state requirements. 

At Hogan Design & Construction, we carry General Liability, Workers Comp, Commercial Auto, and Contractor’s Tools & Equipment policies on all jobs, as well as Builder’s Risk on a per-job basis. We additionally vet all our subcontractors to make sure they have proper coverage as well as provide an additional safety net with an umbrella policy. You can rest assured we’ve got you covered when we begin work in your space.  

For more tips on what to look for in a contractor, download our Guide to Hiring a Remodeler. It’s full of useful information, a questionnaire, and a scorecard to aid in the contractor/design-build firm selection process. 

And contact us to set up an in-person or virtual appointment today to get one step closer to creating your dream space. 

Additionally, for more home-related tips from the team at HDC, subscribe to our monthly e-newsletter, catch up on our weekly blog, or follow us on Facebook or Instagram.