| Insurance Options | Owner listed as Additional Insured | Owners and Contractors Protective policy (OCP). | Other Owner Policies to Consider | Bonds |
| Explanation | If the project is of sufficient dollar value, an owner may request that they be named as an additional insured, this provides the owner a number of protections including an obligation on the insurance company to defend. | This is a separate policy or in some cases a rider that a homeowner can purchase to cover their specific construction project. | Theft under construction - protects homeowner from theft during the construction process. Dwelling under construction - | The coverage provided by the bond is a guarantee of financial responsibility or performance. One type of bond may provide that if an employee or subcontractor steals from the customer’s premises and a police report is filed and the other bond pre-conditions are satisfied, and the contractor fails to replace the stolen goods, the bond company will replace the stolen goods. |
| Cost | An Owner can be listed as an additional insured for a small cost usually not in excess of a few hundred dollars | The disadvantage of an OCP policy may be cost. An OCP policy can have a minimum premium of $750 or more. | | Some counties and other jurisdictions require bonds be provided as part of the permit process. |
| Caveat | A contractor may reasonably request that an owner agrees that any claims made against the policy be limited to claims that arise because of an act or negligence of the contractor and for no other purpose. | OCP coverage is for bodily injury and property damage arising out of the negligence of the contractor and does not replace the coverage offered by workers compensation. So, an adequate Workers Compensation policy is still necessary on the behalf of the contractor. | | Bonds are underwritten based upon the prior claims experience of the contractor as well as their financial responsibility. So, if a contractor does not have good credit a theft bond can be virtually impossible to obtain. |
| Tips | Make sure the “Aggregate Limit” of the General Liability policy is greater than the “Occurrence Limit.”
1. The occurrence limit of the policy is how much will be paid for claims from a single liability occurrence. The aggregate limit is how much the policy will pay in total during a policy year.
2. By using a contractor that has an Aggregate higher than their Occurrence limit you are making sure that if they pay a large claim on another job they will still have policy limits left for you. | OCP is most commonly used in commercial construction projects rather than residential; however it may be strongly advisable for a very large scale remodel. OCP acts in place of the contractor’s General Liability policy with an Additional Insured endorsement. | | Bond requirements of many jurisdication may be minimum values and even a payout of the entire amount may not be sufficient compensation. An contractor may have a standing bond for the contractor's standing employees or subcontractors. |
| Risks | There are a couple of concerns with this method though. First, if the policy is cancelled the homeowner will receive notice, but often that notice will take 30 days or so to reach them which may be after the job is complete. Second, although hopefully rare, in the case of General Liability there is an aggregate limit that can be met with prior/pending claims that may not involve the homeowner.
| Unlike a GCL policy, the homeowner is the owner of this policy and any notice of impending coverage discontinuance would be promptly received. | | |