How to Avoid Contractor Fraud

Starting a house project? Read these helpful tips before you hire a contractor.

                -Get a list of reputable contractors from your insurance company, the Better Business Bureau or a specialized consumer organization like Angie’s List.

                -Contact multiple contractors, and obtain more than one estimate.

                -Don’t allow a contractor to inspect your property if you’re not home.

                -When the contractor is inspecting your property, personally watch him conduct the inspection.

                -Obtain the terms and conditions of the project in writing, including details on specific supplies being used     and who will purchase and deliver them. Include an estimated completion date and a price-deduction schedule if work takes longer than promised.

                -Ask about warranties on work.

                -Make sure the contractor gets the necessary permits and puts them in his name.

                -Ask for references from recently completed work. Call them and look at the work if possible. Ask if there were issues and if the homeowner would use the contractor again.

                -Ask the contractor if he has liability insurance, and get the policy number and agency’s name. Call the agency, and ask them to provide you with a liability certificate of insurance. There should be no charge to you as a customer of a contractor.

                -Avoid signing the contract until the document is reviewed fully and/or discuss the terms of the contract with a legal representative or a knowledgeable source.

                -Pay the contractor by check or credit card rather than in cash.

                -Don’t pay for work in advance. If possible, don’t pay until the work is done. If you do agree to pay portions at different stages, make sure the bulk of the payment is made at the end of the project after inspections are passed.

                -Get these details in writing.  

 

        -Ask for proof of insurance and get certificates of insurance especially workers compensation.

Sources: Ohio Department of Insurance, PIAA of Ohio, and Ted Kinney, CIC, CPCU, ARM

Certificates of Insurance

It is good risk management for customers to check and make sure their vendors have insurance. Because of this small business owners are often asked to prove to their customers they do indeed have insurance. When customers ask for proof of insurance what they are often asking for is a form called a certificate of insurance. A certificate of insurance gives the basic information of a business insurance policy. It tells things such as the insurance company's name, dates the policy covers, name of the insurance agency who handles the policy and highlights the different types of liability coverages the policy has and the limits or amount of insurance in each of those coverages.

Any type of business can be asked to provide a certificate of insurance. Three areas where you see certificates of insurance most commonly asked for are construction and maintenance contractors, businesses that lease space and consultants. The reason that construction and maintenance contractors are often asked to show certificates of insurance are because their customers want to be sure if they cause injury around their premises or damage around their premises that they are covered. Also, many contractors are acting as subcontractors to other construction and maintenance companies. If their subs cause damage or injury they want to be sure they have insurance because if they do not they will then be the responsible ones.

People that lease space are asked for certificates because the owner of the building wants to make sure that if they cause damage to the building they have insurance to put the building back as it was prior to incident that caused damage. They also want to make sure if the person leasing space is responsible for someones injuries while they are visiting the building that they have insurance in place to cover those injuries.

Consultants are asked to provide certificates of insurance in order to meet contract requirements. Often, consultants sign a contract with their customers and in the contract there is always an insurance section that outlines the required coverages they must have. The best way for that customer to make sure the consultant is meeting the requirements is to ask for a certificate of insurance.

So the next time you are asked by a customer to show proof of insurance you will understand that you are being asked for a certificate of insurance. Contact your agent and let them know you need a certificate of insurance. Make sure to provide them with the name and address of the company or individual that is asking you for the certificate.