A remodeling or building project is rife with opportunities to loose control of your expenses. Take these important steps to make sure that your wallet and your property are secure, figuratively as well as literally.
Demand a written proposal or a contract for any sizable project. The contract has to contain the following:
Safeguard yourself and your property by requesting physical verification of contractor's insurance. Here is how it's done: you ask the contractor to request insurance certificates from insurance company, addressed specifically to you. Then you should receive the certificates via fax, e-mail or mail directly from the insurance company or insurance agent. Do not sign anything until you have the certificates in hand.
There are two essential kinds of insurance every legitimate contractor must maintain – General Liability insurance and Worker's Compensation. A few notes on each of these:
General Liability Insurance protects you in case of accidental damage which may be suffered by your property (house) during work process. As unsettling as it may be, a single accidental fire caused, for example, by improperly disposed rags used to wipe oil-based stain can destroy the entire house (see here and here). You must make sure that policy limit is high enough to cover the home and possessions – it is always better to be safe than sorry.
Worker's Compensation is also absolutely essential as it shields you from liability in case of injuries contractor's employees may sustain while working at your house. You well know that medical care can be incredibly expensive and if contractor's employees are paid in cash and are not insured, things can turn very ugly. When it comes to litigation, lawyers first go after the contractor, then after the homeowner and then after the property – that's you and your house! Maintaining Worker's Compensation is mandated to all employers by the state, and for risky occupations such as construction and remodeling it is expensive. It is not at all uncommon for people engaged in remodeling field to skirt around this requirement by not buying the insurance and paying employees “under the table”.
There is also a quite likely pitfall, related to a so-called “ghost” policy, which is called Worker's Compensation, but costs next to nothing and covers no one. These “ghost” policies are result of a strange wrinkle in North Carolina law. You can learn more about it at this link. When you have insurance certificate in hand it is well worth it to call the insurance company or the agent and make sure that the policy is a real one and not a “ghost”. This is a common situation and they will know what you are talking about.