As the weather improves, many homeowners start planning majorremodeling or renovation projects. According to StatisticBrain, in the next two years 26% of homeowners plan a bathroomrenovation or addition and 22% plan a kitchen renovation oraddition.

I've been through five major remodeling projects, includingrebuilding after Hurricane Sandy, and I'm planning a full kitchenremodel next year. I've learned a lot about the insurance coverageissues for the homeowner, the contractor and the subcontractors,and I'm sharing what I've learned.

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Some people (like me) hire a general contractor to manage therenovation process while others prefer to manage the projectthemselves. Some homeowners are willing to be do-it-yourselfers andactually do some tasks while hiring licensed subcontractors forplumbing and electrical work.

However you choose to remodel, keep this in mind: The homeowner,the general contractor and the subcontractors — plumbers andelectricians, for example — all need insurance coverage.

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No. 9: Review your homeowners insurance.

Contact your home insurance carrier or broker to confirm whetheryour policy covers your home and property while it's beingremodeled. For example, if you have to move your furniture out ofthe rooms that are undergoing renovations, consider getting astorage container to put in your driveway. I rented a 40-foot unitwhen I added a second floor to my single-story ranch and filled itwith furniture and everything from my attic.

Your homeowners policy should cover the contents in thecontainer, but confirm the coverage with your broker. If you don'thave room for a container on site and you put your belongings in anoffsite storage unit, you may need a separate policy.

If you're planning to do the work yourself, your first callshould be to your broker. Some remodeling projects if notundertaken correctly may void your homeowners policy.

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No. 8: Make sure the contractor is licensed and bonded.

After you've selected a general contractor (GC) but before yousign a contract for the project, be sure that the GC is licensedand has a surety bond. If the GC can't finish the job for somereason — illness or bankruptcy, for example — the surety bond willcover any financial losses the homeowner incurs in getting the jobfinished. Your contract with the GC also should agree that all thework will be done according to current building codes and allpermits will be obtained.

The GC is responsible for property damage, injuries on the jobsite and negligence in workmanship, which should be covered by theGC's general liability and worker's compensation insurance. Ask tosee the certificates and check that the coverage will be in effectthe entire time that work is being done.

“This is the biggest mistake homeowners make,” says Alex Totino,president of ABC General Contractors, Stamford, Conn. “Only one outof 20 homeowners has ever asked to see my insurance certificate.Most are focused only on the price of the job.”

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No. 7: Confirm the contractor's liability coverage.

Many contractors have general liability (GL) insurance designedspecifically for remodelers, which covers the GC for accidentalinjury to someone other than a worker or himself (many GCs aresmall businesses, operated by their individual owners with a fewworkers). For example, a delivery driver may trip over the GC'smaterials and be hurt in your driveway. The GC is responsible forthat injury, not you.

Generally, the GC's liability policy excludes coverage for toolsand equipment. The GC and the subcontractors should speak withtheir brokers about the best way to cover equipment and tools,which can easily be damaged, lost or stolen. In one case the GC'semployee left an expensive, new hammer in the wall between thestuds and covered it up with dry wall. No one knew what happened tothe hammer until three years later when the GC worked on a projectfor the same homeowner and found the hammer. (Yes, it happened onone of my remodeling projects.)

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No. 6: Buy a builder's risk policy.

Generally, building materials and equipment belonging to the GCor subcontractors aren't protected from theft by your homeownerspolicy. Ask your broker whether you should buy a builder's riskpolicy for the length of time that the construction is ongoing.This policy would cover any of the construction equipment ormaterials that are left on your property before they're installed.With the high cost of copper, thieves target construction sites,looking for copper plumbing pipe, for example.

The contractor's GL policy also covers damage to your existingproperty, but not any new work the contractor does. You may beenclosing a deck to add a new room, for instance, and the newelectrical system malfunctions after the electrician installs it,causing fire damage to both the existing house and new space. Inthat situation, the GC's liability policy covers damage to your oldhome, but not the new addition, even though the GC is liable fordamage to the addition as well.

A builder's risk policy covers situations like this one, andmakes sure that the project is completed. The GC or the homeownercan purchase the policy; however, the named insureds usuallyinclude the homeowner, the homeowner's mortgage company, thegeneral contractor, the subcontractors and the lender if theproject is being financed. Be prepared: Determining the propercoverage and policy may require several conversations with brokersand carriers as well as lenders.

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No. 5: Insure commercial vehicles and equipment.

Most GCs and subcontractors drive commercial vehicles that aredesigned to carry their equipment, materials and tools. They alsomay have dump trucks or other vehicles they use to bring suppliesto the site and haul away debris. These vehicles require specialinsurance coverage, primarily for tools and equipment stored in thetrucks, and state law may require that only someone with acommercial driver's license can operate them.

The insurance policy should cover vehicles when they're storedat a construction site as well as on the contractor's premises. Mycontractor left his truck with tools and paint in my driveway forseveral days because it was more efficient to have his workers comedirectly to the job site. The truck was always locked and myproperty is fairly secure, but theft and vandalism are known risks.The contractor's commercial vehicle insurance policy covered thissituation.

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No. 4: Confirm subcontractors' insurance.

You also should confirm that the subcontractors carry workers'compensation coverage of their own or are covered by the GC'spolicy. If a subcontractor is injured on the job at your site, youdon't want to be liable for the injuries.

Each subcontractor should carry its own liability insurance, andmany policies are designed specifically for the kind of work thesubcontractor does and the risks from that work. The GC shouldrequire the sub to name the GC as an additional insured on thesub's policy. This allows the GC to speak with the sub's insurancecompany directly in case of a claim. As the homeowner, you shouldask the GC about the subcontractors' insurance coverage and ask tosee coverage certificates if you have any doubts.

Totino says that even when homeowners ask about his insurance,they fail to ask about insurance for the subcontractors. Totinomakes it a practice to include current insurance certificates fromhis subcontractors along with his own to show the homeowner. If forsome reason the subcontractor doesn't have its own insurance,Totino arranges to provide the necessary coverage.

Even though the GC may have worked with the subs for a long timeon many jobs, accidents can happen. The GC's contract with the subshould include a “hold harmless” clause that protects the GC fromhaving to pay for damage caused by the sub's mistake orcarelessness. The contract also should include an indemnificationclause, in which the subcontractor acknowledges that it will beresponsible for any damage it causes.

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No. 3: Determine adequacy of policy limits.

Adequate insurance coverage includes the limits of the policy,not only whether there is a policy in place. General liabilitylimits vary, but most general contractors carry a $1 million limit.Depending on where you're located, and the size of the project,this amount may not be enough.

As the homeowner you should review your policy limits as well.Are the limits for bodily injury and property damage high enough tocover the risks from your remodeling project? Do you and the GCeach need an umbrella policy? It's not uncommon for injured workersto file claims against the homeowner and the GC.

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No. 2: Confirm completed operations coverage.

Completed operations coverage provides insurance for things thatcan go wrong after a job is done. For example, in my second flooraddition, the plumber installed a bathroom without insulating pipeslocated in an outside wall and above a garage. When the pipes frozethe next winter, the contractor had to open walls, repair frozen,burst pipes, add insulation, and repair and repaint the walls. Thecontractor also installed a heater in the garage to mitigate therisk of future frozen pipes.

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No. 1: Consult your broker.

There are so many variables to insurance coverage for homeremodeling projects, some mandated by state law, that you and theGC should consult your brokers before starting the project. The GCcan also consult the local remodeling association to get the bestadvice on what insurance he needs and is available for hisbusiness.

As the homeowner, remember to speak with your insurer aboutincreased coverage for the value of your property after it's beenremodeled. A two-story colonial is worth much more than asingle-story ranch-style house.

As for surviving the project itself? Maintain your sense ofhumor and expect things to go wrong. But as long as you have faithin your contractor—and adequate insurance coverage—it will turn outfine.

Do you have your own stories of remodeling insurance claims orcoverage issues? Please share your advice and anecdotes with us inthe comments section.

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