What’s the right amount of liability coverage for a home addition?
We’re about to start a significant addition to our home that will take over four months and involve multiple subcontractors. We’ll be living in the house during most of the construction.
According to the contract, our builder has general liability insurance of $2 million ($1 million per occurrence), but they advise that if we desire additional coverage, we need to purchase it ourselves. Our current homeowners’ policy provides $500,000 in liability coverage.
Do you think having $2 million plus $500,000 is sufficient? It feels like a lot to me, but I’m not an expert.
Also, what other questions should I be asking the builder regarding their insurance coverage?
It’s great that you’re being proactive about liability coverage for your home addition. When considering how much liability coverage you need, here are a few points to think about:
Contractor’s Liability: The builder’s $2M general liability insurance is a positive sign. It means they have coverage for incidents that may occur due to their work. Since they carry this coverage, it protects both you and them in case of accidents related to the construction. The $1M per occurrence limit means that this is the maximum they will pay for any single claim.
Your Homeowners’ Coverage: Your existing $500k liability coverage provides additional protection, which can be helpful. When combined with the builder’s coverage, you have a total of $2.5M, which is generally considered a robust amount. However, you should assess whether this amount meets your comfort level and risk tolerance.
Potential Risks: Consider the specific risks associated with the project. For example, will the addition involve heavy machinery or extensive renovations that could lead to higher risk? You might want to consult with professionals, like an insurance agent or a legal expert, to evaluate whether additional coverage might be necessary based on the scope of your project.
Questions for the Builder:
Ultimately, it’s about ensuring you feel secure about your potential liabilities during the construction process. If $2.5M feels adequate to you and any professionals you consult agree, then you’re likely in a solid position.