Why You Need Construction Insurance
Here’s a risky way to save money building a modular home. Select a modular dealer and contractors who are not properly insured.
Imagine that a neighbor’s child is seriously hurt when he falls into your cellar hole before your modules are set on the foundation. Imagine that one of the trucks delivering your modules strikes your neighbor’s car causing serious damage. What if the crane company drops one of your modules rendering it unusable? What if a member of the set crew is seriously injured or killed when he falls from your roof? Or what if the plumber fails to securely connect a pipe, which causes severe water damage before the leak is discovered?
Accidents and mistakes can happen when building a home, regardless of the type of construction. Since the right insurance can mitigate the damages, you need to ensure you’re thoroughly covered.
Require Everyone to Obtain Construction Insurance
This is best done by requiring everyone involved in building your home to have insurance. (Here’s a previous blog that elaborates on the insurance you need.) Making this a requirement won’t prevent disagreements about who is responsible for coverage, but it will increase the likelihood that one or more of the insurers will take on this responsibility, which is a lot better than you being saddled with the liability.
Verify Construction Insurance Coverage
Making insurance a requirement, however, isn’t enough. You need to verify that each party has a current policy with sufficient coverage. To do this you need to insist on receiving a “certificate of insurance” directly from each party’s insurance agent. Getting a copy of the certificate directly from the insurance agent will protect you against being duped by a dealer or contractor whose policy has run out, since it is not difficult for someone to doctor a photocopy of an expired certificate. You might be surprised how often this happens, mostly because builder insurance is expensive. There will be no sympathy from the insurance company, however, if you file a claim against a policy that was not renewed. After receiving the certificates, you should ask your own agent to review the coverage. They should be able to determine if the coverage includes sufficient liability insurance and workers compensation insurance.
Secure Your Own Construction Insurance
Since you need to have coverage from everyone working directly on your project, you also need to follow the same procedure with any subcontractors you directly hire. In addition, you should obtain either a “builder’s risk” policy or its equivalent for yourself, since this will provide better coverage against theft and vandalism than an ordinary homeowner’s policy.
For more information about modular home construction insurance during its construction, see Selecting a Modular Home Dealer, Selecting a General Contractor, and Financing a Modular Home in my book The Modular Home.