How to be Your Own Contractor

Being your own general contractor means that you will be responsible for everything from obtaining permits to hiring subcontractors and laborers to arranging for building inspections. But before you do anything else, check with your insurance broker. Your standard homeowner’s policy will not cover liability for injury to persons your employ. It is a simple matter for you to purchase a policy, known as workers’ compensation insurance, to cover your liability for work-related injuries.

Workers’ Compensation Insurance

Though its provisions vary from state to state, workers’ compensation insurance generally pay all costs of treatment – surgical, medical and hospital – required to cure or relive the effects of an occupational injury. It also reimburses the injured worker for wags lost while recovering from an injury. If the injury is fatal, the insurance pays burial expenses and awards survivors a settlement. Even though you carry workers’ compensation insurance, you may have additional liability, particularly if you are proved negligent.

Own Contractor How to be Your Own Contractor

Where to get it: You can get a workers’ compensation policy through your insurance broker, directly from an insurance company, or from a state fund if one is provided by your state. You can obtain a policy for 3 months, 6 months, or whatever term you think will adequately cover the duration of your project. If the work is still in progress when the policy expires, coverage can be extended.

Paying the premium: You pay for workers’ compensation insurance before the work begins. The cost is figured on a combination of three factors: the estimated number of hours required to complete the task, the rates of pay for the crafts involved, and the relative personal risk inherent in the work itself. The premium for roofers is higher than for cabinetmakers, for example, because of the higher risk involved in roofing work.

After your addition is completed, you’ll add up your actual payroll expense. If it exceeds your initial estimate, you’ll owe the insurance carrier an additional sum. If it is less than your estimate, you may be entitled to a refund. However, there are minimum premiums, whatever your costs.

If no worker you employ directly will earn more than the minimum set by the state workers’ compensation board (normally somewhere around $100), then it’s possible that your homeowner’s insurance will cover your liability. Check this with the state board and with your insurance company.

Make sure that workers who are employed by a subcontractor working on your addition are covered by the subcontractor’s policy.

Registering as an employer: If you employ people directly and if they will earn more than the minimum amount set by the estate, your must not only have a workers’ compensation policy, but you must also register with the state and federal governments as an employer, withhold and remit income taxes and disability insurance, and pay social security insurance.

Hiring Subcontractors

When you act as your own general contractor and put various parts of your project out to bid with sub contractors, you must use the same care you’d exercise in hiring a general contract. You will need to check referenced, financial resources and insurance coverage of a number of subcontractors, get bids, work out detailed contracts, and then carefully supervise the work. The process will be time-consuming, but you’ll save money and have much more control over the quality of the work.


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