Ask about Insurance Coverage
All contractors should have general liability insurance, and if they have employees, then they should also have workers' compensation coverage. While general liability insurance is not a requirement in most states, this coverage will protect you should the contractor damage your property. If the contractor does not have this insurance, then you may have to pay for the damages out of your own pocket or through your property insurance.
Workers' compensation coverage for employees is a requirement for contractors in most states. Without this coverage, you could be liable for any injuries suffered by workers on your property.
Most states require contractors to be bonded, but some bonds do not cover every aspect of a remodeling job. A license bond will cover your project only up to the amount of the surety bond. For instance, California requires contractors to carry license bonds for $12,500. If your remodeling job costs more than this, then the excess amount will not be covered unless the contractor acquires a contract bond.
A contract bond guarantees the completion of the job as per the contract. If you are obtaining a loan for your remodeling job, then your lender will probably require this type of bond to be purchased before the funds are released.
Read the Contract
Signing a contract is your final acceptance of a contractor. Before signing a contract, you should make sure it includes all of the following details:
- All materials and labor are itemized.
- Financial terms are clear, including price, payments and fees.
- Warranties are written into the contract or provided in a separate document.
- Local code restrictions are outlined in the contract.
Finally, you should never sign the contract unless you understand everything in it. If you do not understand all of the terms, then go over the contract with a third party before signing it.