Americans spend nearly $400 billion annually in home remodeling projects. And this opens up a brand new source of risk for home owners, risks for which insurance agents should understand. Addressing this activity is another example in which savvy insurance agents and brokers are wise to transcend day-to-day insurance sales to become their client's personal risk manager, employing the next level of risk management techniques. One such valuable technique is contractual risk transfer. With a major remodeling project, the home owner should try to transfer as much of this newly acquired risk as legally possible to the general contractor (GC) and any subcontractors.

With virtually any type of major home improvement or building project involving contractors, a clearly worded construction contract is essential. The contract should outline the following.

• Scope of the work and the total price
• Legal names of both parties and the GC's physical address
• GC's license and tax ID number
• Labor and materials necessary
• Warranty information
• Timeframes in which the project will be completed, including estimated start and end dates
• Role of the home owner and his or her responsibility
• Indemnification clause that benefits the home owner

The contract should specify that the GC has workers compensation and commercial general liability (CGL) insurance and should also provide the home owner with certificates of insurance for both policies. In addition, the GC should list the home owner as an additional insured under the GC's CGL policy and provide the home owner proof of his or her status. This is just a sampling of important contractual risk transfer techniques to consider. IRMI's Personal Risk Management and Insurance reference service offers an in-depth analysis of contractual risk transfer ideas for these projects along with smart techniques for property lease agreements, home-sharing agreements, and service please contact Debbie at youarefirst [at] scicteam [dot] com or call 719-329-4441