Does Homeowners Insurance Cover Damage Caused by a Contractor?

If you own a home, especially an older home, you may have hired a contractor to make repairs or renovations to your home. Although you may have done your due diligence when choosing a contractor, accidents and damage can still happen. 

Whether it's a renovation gone wrong or accidental damage during construction, dealing with contractor-related damage can be stressful. But does your homeowners insurance have you covered? In this article, we'll explore homeowners insurance coverage for damage caused by contractors, define contractor-related damage, how to assess your contractor's insurance, and more.

At a glance: 

1. Familiarize yourself with the basics of homeowners insurance coverage, including coverage for dwelling, other structures, personal property, loss of use, and personal liability.
   
   
2. Contractor-related damage refers to harm or destruction caused by a contractor during a project, encompassing structural, property, environmental, and financial damage.
   
   
3. Take steps to protect yourself from contractor-related damage by researching and vetting contractors, getting everything in writing, and staying actively involved in the project.
   
   

Understanding homeowners insurance coverage

Before we get into the nitty gritty about contractor-caused damage, it’s important to review the basics of homeowners insurance:

1. Coverage A, also known as dwelling coverage, helps cover the cost of repairs or rebuilding if the structure of your home and any attached structures, are damaged by a covered peril. 
   
   
2. Coverage B, or other structures coverage, covers structures on your property that are not attached to your home, such as a shed or fence.
   
   
3. Coverage C, or personal property coverage, helps cover the cost of repairs or replacement if your belongings are damaged or destroyed by a covered peril.
   
   
4. Coverage D, or loss of use coverage, helps cover additional living expenses if your home is uninhabitable or not fit to live in due to a covered loss, including temporary housing, food, and storage.
   
   
5. Coverage E, or personal liability coverage, helps cover if someone is injured on your property or if you accidentally damage someone else's property.
   
   
6. Coverage F, or medical payments, helps cover the cost of medical bills if someone is injured on your property, even if you aren't responsible. 
   
   

Defining contractor-related damage

Understanding the types of damage a contractor may be responsible for is crucial for homeowners facing such situations. Now that we’ve covered the basics, let's define what constitutes contractor-related damage. 

The contractor-related damage we are referring to is any harm or destruction caused by a contractor or their activities during a project or job. This damage can take various forms, such as:

• Structural damage, such as cracks in walls, broken windows, or foundation damage
  
  
• Property damage either directly caused by the contractor or indirectly as a result of their actions
  
  
• Environmental damage through activities such as spills or improper disposal of materials
  
  
• Financial damage, such as legal fees associated with resolving disputes

Is contractor-related damage covered by home insurance?

So now that we have a better understanding of homeowners insurance coverage, let’s explore whether or not it covers damage caused by a contractor.

The short answer is: homeowners insurance may provide coverage for damage caused by a contractor. However, the extent of coverage may vary depending on the circumstances.  Each claim is evaluated based on specific facts and is subject to the terms of your policy. 

If a contractor damages your home while working on a project, these common types of coverage may apply:

1. Dwelling damage coverage. If a contractor causes damage during renovation or repair work, this coverage may help pay for the necessary repairs.
   
   
2. Personal property coverage. If a contractor's actions lead to damage to these items, such as during construction or moving activities, personal property coverage may help cover the cost of repair or replacement.
   
   
3. Liability coverage. This coverage can help protect homeowners from legal expenses and settlements if they are found liable for the contractor's actions.
   
   
4. Additional living expenses coverage. If contractor-related damage makes your home temporarily uninhabitable or unfit to live in, additional living expenses coverage may help cover the cost of alternative accommodations, such as hotel stays, and additional food expenses as a result of displacement from the home during the repair process.
   
   
5. Endorsements or riders. Depending on the specific risks associated with hiring contractors, homeowners may be able to add endorsements or riders to their home insurance policy for additional coverage. 

It's important to review your homeowners insurance policy carefully to understand your coverages, including any exclusions or limitations. Additionally, coverage for certain types of damage, such as faulty workmanship, might require specialized coverage.

Subrogation potential

If a policyholder files a claim for damage caused by a contractor, and their insurance provider pays out for the claim, the insurer may seek legal action against that third party to recover the money paid on the claim. Once the insurance company recovers its money, it may reimburse the policyholder for any deductible paid or other incurred expenses. This is known as subrogation.¹

 

Protecting yourself from contractor-caused damage

Protecting yourself from damage caused by contractors involves several proactive steps to minimize risks and ensure appropriate safeguards are in place. Here are some essential measures to consider:

Research and vet contractors

Before hiring a contractor, it’s important to do your research and vet them thoroughly. Check online reviews, check their licensing and certifications, ask about their experience with similar projects, and inquire about their insurance.

Assess your contractor's insurance

Contractors should ideally carry their own insurance coverage, such as general liability insurance or professional liability insurance, to protect against potential liabilities arising from negligence. Before hiring a contractor, it's essential to assess their insurance coverage. Here are some steps you can take to evaluate your contractor's insurance coverage:

1. Request proof of contractor insurance policy
   
   
2. Verify coverages and limits, including liability 
   
   
3. Check for exclusions or limitations including clauses related to subcontractors or types of work not covered
   
   
4. Confirm licensing and bonding to ensure they meet professional standards and have the financial resources to cover any potential liabilities
   
   
5. Seek advice from a legal professional specializing in construction or contract law if you have questions
   

Get everything in writing

When hiring a contractor, it’s important to get everything in writing. Clearly outline the scope of work, project timelines, materials to be used, and payment terms in a written contract. Include provisions for addressing issues such as delays, changes to the project scope, and procedures for resolving disputes. It’s also a good idea to include a clause that holds the contractor responsible for any damage they cause.

Consider additional coverage

If you are planning on hiring a contractor for a major renovation or construction project, it may be a good idea to consider additional coverage. Depending on the scope and complexity of the project, extended coverage or warranties against contractor-caused damage can provide peace of mind. 

Tips for protecting yourself against contractor-related damage

While most contractors are skilled professionals who deliver quality workmanship, there are inherent risks involved in allowing outside parties to work on your property. Homeowners need to take proactive steps to safeguard their interests and assets. 

• Communicate your expectations clearly with the contractor regarding project timelines, quality standards, and safety protocols.
  
  
• Carefully review the contractor’s insurance before signing a contract.
  
  
• Stay actively involved in the project and regularly inspect the work being done to avoid faulty work.
  
  
• Take steps to protect your property during the construction or renovation process, such as covering floors and furniture, and securing valuables.
  
  
• Keep detailed records of all communications, contracts, invoices, and receipts.
  
  
• Address any issues promptly and document damage with photographs or written descriptions. Notify the contractor in writing and work together to find a resolution.
  
  
• Familiarize yourself with your rights and responsibilities as a homeowner, including any applicable laws or regulations governing construction projects in your area. Seek legal advice if necessary to protect your interests and enforce contractual agreements.
  
  

Navigating contractor-related damage with confidence

While homeowners insurance can provide valuable protection for damage caused by contractors, it's important to take steps to protect yourself from potential issues. Following the steps outlined in this article and staying informed will help you navigate contractor-related damage with confidence. 

Don’t forget to contact your insurance company or insurance agent for their assistance. In the event of a claim, some insurance providers, like Openly, maintain a network of vetted vendors trusted to complete repair work efficiently and effectively. 

Choosing Openly for your high-value home insurance ensures that you're informed about the coverage options that best fit your needs. You receive more than just insurance; you gain a partner committed to offering comprehensive protection and peace of mind, ensuring you're well-prepared for whatever comes your way.

By filling out our form, you can connect with a licensed independent home insurance agent in your area who will guide you through tailoring your coverage. This personalized service aims to boost your confidence in your home's protection, highlighting the significance of being prepared for unexpected events, including contractor mishaps.

* We provide this information to help you understand insurance. Any coverage is subject to the terms of your policy. Please refer to your policy and declarations page for complete terms, conditions and coverage details.

¹ IRMI. “Subrogation.” Accessed 15 April 2024. https://www.irmi.com/term/insurance-definitions/subrogation