INSURANCE & LIABILITY - Things to know before hiring a company...

Driving without auto insurance or living without health insurance is unthinkable, yet some homeowners regularly hire contractors without properly checking both liability and workers' compensation insurance. All companies and individuals hired to complete work at or in the home should carry both liability and workers' compensation insurance. Furthermore, some homeowners regularly lend tools to contractors and help them with the work without fully understanding the tort liability consequences of their actions. To limit tort liability exposure, homeowners should always warn workers about any known hazards, should never lend tools to workers, and should never help workers.

Liability & workers' compensation insurance

Liability insurance is designed to pay for damage resulting from a contractor's work. For example, if a tree service cuts down a dead tree in your front yard and the tree accidentally falls through your roof or through your neighbor's roof, the tree service's liability insurance would most likely pay for damages. If, instead of falling through your roof, the tree fell and injured your neighbor, the tree service's liability insurance would again pay.

Workers' compensation insurance is designed to compensate the injured worker or injured contractor in the event of a job-related accident. If the tree falls onto and injures one of the tree service's employees, the tree service's workers' compensation insurance should pay the injured employee's hospital bills and lost wages. Since many contractors and company employees are injured on the job each year, workers' compensation insurance is quite expensive. Some high-risk home service companies claim that as much as 40 percent of their cost is workers' compensation insurance.

Just as some individuals do not have health insurance because of the cost, some small companies do not carry proper insurance because of the cost. From the small business owner's perspective, "Insurance is an expense that can be eliminated. . . . After all, we haven't had an accident in years. . . ."