The Risks of Working With Uninsured Contractors at Your Short-term Rental

As a vacation rental property owner, have you ever considered the potential risks lurking behind a simple renovation project? When it comes to maintaining or upgrading your property, hiring contractors is often unavoidable. However, the decision to hire an uninsured contractor could put your entire business at risk. From liability issues to financial losses, the consequences can be severe and far-reaching.

The following are five red-flag risks associated with hiring uninsured contractors, emphasizing the necessity of selecting those who are adequately insured:

1. Legal Noncompliance and Penalties

Hiring uninsured contractors can violate laws and regulations that require specific insurance coverage on job sites. Project owners could face legal consequences, including fines and penalties, for failing to comply with these requirements. Ensuring all contractors are properly insured helps mitigate the risk of legal noncompliance and the associated financial repercussions.

We’re here to help you reduce risks at your short-term rental. Download our Safety Enhancement Checklist to evaluate the safety of your property.

2. Liability for Workplace Injuries

If an uninsured contractor or their employee is injured, the project owner might be responsible for covering the medical expenses and lost wages. And in many states, workers’ compensation laws stipulate that the responsibility extends to the hiring entity if the contractor is uninsured.

3. Financial Responsibility for Property Damage

If an uninsured contractor damages property on a job site, the project owner would likely have to bear the financial burden for the property damage. Therefore, contractors must have general liability insurance to cover these expenses.

4. Third-party Liability for Personal Injury

Project owners may face significant legal and financial risks if an uninsured contractor causes injury to a third party, such as a site visitor or a bystander. Without the contractor’s liability insurance to cover medical expenses, legal fees and potential settlements, the responsibility could fall on the hiring party.

5. Compromised Safety Standards

Hiring uninsured contractors can increase the risk of non-compliance with safety standards. They often lack the resources or commitment to adhere to industry best practices, leading to unsafe working conditions, higher accident rates and potential violations of OSHA guidelines. Ensuring that contractors are properly insured is key to maintaining high standards of job site safety.

Working With General Contractors at Your Short-term Rental Property

The best way to minimize your renovation risk is to hire a reputable, insured general contractor. As part of the bidding process, ask the general contractor to provide a Certificate of Insurance and/or copies of the policies. Specifically, check for the following coverage:

• Workers’ Compensation: Verify that they have workers’ compensation coverage in case an employee or subcontractor gets hurt on the job.
• General Liability: This insurance covers losses due to negligence and errors or omissions that result in property damage. Also, ask that you’re added as an “additional insured.”

• Builder’s Risk: This policy is designed to cover damage to your property and materials, including those not installed yet. We can help you verify whether you should require this from your contractor, based on your renovation project.

If they don’t carry the proper coverage, they’re not the right contractor for your rental renovation job!

Don’t Be at Risk — CBIZ Vacation Rental Insurance

Hiring uninsured contractors could expose you to risks and cost you more if something goes wrong. Hiring contractors who carry adequate insurance coverage helps reduce potential liabilities and fosters a safer and more financially secure job site. To discuss your unique risks and to learn more about coverage options, request a free quote.

This blog may contain scenarios that are provided as examples only. Coverage is subject to the terms, conditions and exclusions of the policy issued. The information provided is general in nature and may be affected by changes in law or the interpretation of such laws. The reader is advised to contact a professional prior to taking any action based upon this information.

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