The Right Way To Verify Contractor Insurance

First, before I begin, I want to stress that only a very, very small percentage of contractors are responsible for forcing us to use systems like what I am about to describe. Unfortunately, it is necessary to check to make sure that a contractor’s insurance is still valid and in force to limit your liability when they do work for you. The overwhelming majority of contractors are great, honest, hard-working folks. The system I am about to share will weed out the few bad seeds and even help you find the occasional forgetful or unintentionally uninsured contractor.

Some investors think the right way to check to see if a contractor is insured is to ask to see their insurance card/sheet. Once the investor looks at that card and sees that it says they are insured through the work period they think that they are all good. While 9 times out of 10, you’ll probably be fine, I’m not sure I’d like to risk possibly hundreds of thousands of dollars or more in liability on those odds. So here is how you should check a contractor’s insurance.

Ask them to provide you with their proof of insurance card/sheet and preferably get a copy. If you can’t get a copy, write down the insurance company’s information, the contractor’s information and especially their policy number. Then, instead of just calling the number of the insurance company from the card, use your phone book or another third party source to get the number of the insurance company. Why go through the trouble? It’s the same reason that many schools now call the parent’s phone number on record when a child brings in a sick or tardy note from home and not the number on the note.

Once you call the insurance company, check to make sure their policy is paid up and that they are covered through the period that you are having them do work for you. Your potential contractor could have been on a payment plan, made their first payment but somehow their subsequent payments may not have made it to the insurance company. So, they might have had insurance info that showed they were insured, but since a later payment was not received, they really are NOT insured.

Also, make sure that they are insured for the type of job they are doing. Insurance policies differ and you want to make sure you understand what they are insured for and what they are not. Better to know up front than to find out later in a much more unpleasant way.

In summary, you’ll find that more often than not, this will be an exercise in verifying what you already knew, but in that rare case when you find out that it is not exactly what you expected, it makes the practice completely worthwhile.

Until my next post,

James

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