The housing market is slumping; economists predict it may take several years to sell the inventory that's currently on the market. That means many potential sellers are re-evaluating their housing needs and making home improvements instead of picking up stakes and moving.

New kitchens, media rooms and master bedroom suites top the list of remodeling additions that are dotting the construction landscape across the country.

For a contractor working on any of these projects, having the right policy can make all the difference should the homeowner have to do the one thing he or she doesn't want to do--call the contractor because there is a problem with the work.

Every contractor, whether a general contractor or artisan, such as tradesmen in tiling, windows, floors, drywall, carpentry, plumbing and electricians, should have some type of insurance coverage. But all policies are not created equal. Some policies include exclusions that could be detrimental to the contractor if there is a claim.

Many different markets offer coverage, but agents need to be up-to-speed on the nuances of the exclusions. Here are some exclusions to be aware of when selecting a policy:

o Residential.

Believe it or not, if a policy has this exclusion, ANY work done on a residential property would not be covered.

o Tract/Row, condo and town home.

Again, if work was done on these types of structures, ANY claim would not be covered.

o Subcontracted work.

Many contractors will subcontract work such as the electrical, plumbing, tiling. If there is a problem with work done by a subcontractor, such as an electrician, the contractor would be exposed since there would be no coverage for the subcontractor.

o Product and completed operations.

This exclusion eliminates coverage for all products and completed operations of the contractor.

Some agents may ask why the markets even offer contractor coverage with these exclusions. Many agents may not know about these exclusions and sometimes contractors are simply looking for a low premium. Not many agents are aware that coverage can be purchased at a reasonable premium without the exclusions.

For instance, a commercial general liability policy for an artisan contractor can have premiums as low as $1,000 for coverage limits of $1 million per occurrence, $2 million per aggregate. It's worth it for agents to closely examine a contractor's policy to determine what, if any, exclusions are included.

A more robust policy does not necessarily equal more premium.

Keep in mind even without exclusions, coverage does not always cover everything associated with a remodel or even a new build, whether commercial or residential. Some typical exclusions for contractors include exterior insulation finish system and total pollution.

Remodeling and artisan contractors can increase their basic coverage limits by adding an excess or umbrella policy. While the usual statement is $1 million to $2 million limits, higher limits may be needed for major home remodeling projects or commercial renovations and new builds. An excess/umbrella policy would fulfill the requirement.

With contractors, a primary exposure is for construction defect claims. The two most common targets of these claims are the general contractor and the subcontractor.

According to most contractor policies, four things are needed to trigger coverage for a claim.

1) An occurrence resulting in

2) Bodily Injury or Property Damage

3) During the policy period and

4) Within the coverage territory.

Sometimes the occurrence date is the date on which the damage becomes apparent, but it also could be an actual injury date such as a trip or fall. All policies also could be triggered from the date of the exposure, such as when a patio was originally installed, until the date of manifestation, such as when water seepage was first noticed.

A contractor's claim usually involves an allegation that the work is not done correctly, such as a newly installed roof leaks. Since the policy is not a warranty for the contractor's work, it wouldn't cover replacement of the roof as a work product.

While coverage for the actual roof--the work product--would be denied, the policy could provide coverage for residual damages triggered by the "bad" roof, such as water damage inside the home.

Another example of a typical claim is when the contractor causes actual property damage. These claims would be things like the contractor breaks something in the house, damages a walkway or car, or drops tools on a marble floor and it cracks.

If an agent isn't aware of the policy exclusions, there is a potential, particularly in these examples, that most, if not all, of the claims could be denied.

The best thing for an agent to do is ensure that regardless of the type of contractor, the policy chosen for the client is free from as many exclusions as possible to help ease the burden should a claim need to be filed.

Special Reports /

Beware Of Leaky Contractors Coverage

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