Factors to Consider When Choosing a Home Improvement Pro

Whether you are looking to do to some major remodeling or if your home just needs some basic repairs, deciding on a contractor for your home improvement project can be difficult. It's certainly not a decision you should make in haste.

How does your insurance factor into home improvements? Most homeowner's insurance policies include four basic types of coverage:

• Repairs to the home because of damage caused by specified disasters;
• Replacement of items lost due to theft or damaged by specified disasters;
• Liability coverage; and
• The cost of temporary housing in the event that a specified disaster causes significant damage to the house.

While all these protections are equally important in the long run, when it comes to home improvements, your liability coverage comes to the forefront. This form of protection insures you against any injury claims made by uninsured workers, as well as property damaged during the project. Liability protection also pays for the cost of your legal defense in any related court cases and covers awards to injured workers, as defined by the terms of your policy.

Of course, your home insurance shouldn't come into play if you've selected a highly qualified contractor to get the job done. Before you make the hire, set up an interview so you can ask some questions, including these:

1. How Long Has Your Business Been Around?

Businesses that have withstood the test of time generally do good work and have enough customer reviews to back it up. Look for reviews on the internet and use a consumer protection agency, like the Better Business Bureau, to check up on their complaint history. Remember to take internet posts with a grain of salt, and that BBB records don't always tell the whole story.

2. Do You Hold a State License?

Most states license plumbers and electrical contractors, but just 36 states have a license or certification for contractors and home remodelers. You can find out what types of contractor's licenses are available in your state by contacting your local building department. If your state requires home contractors to be licensed, do not hire anyone without seeing proof of their licensure.

3. Are You Bonded and Insured?

Only hire a contractor who carries insurance that covers against damages to your property, personal liability, and worker's compensation coverage. If you hire an underinsured contractor, your insurance will be making up the difference if something should happen.

4. Does My Project Require a Permit?

A good contractor will get all the required permits before starting a project.

5. Will Sub-contractors Be Used During the Project?

Sub-contractors are not necessarily a bad thing, just make sure to meet them first so you can check out their credentials. Subcontractors are also a good source of honest information about the prime contractor. A little known fact for many homeowners is that a "mechanic's lien" can be placed against your home if the contractor does not pay their sub-contractors or material suppliers, so ask if the contractor makes prompt payments.

While negotiating the terms of your home project, ask the contractor and all sub-contractors to sign a lien waiver or release statement that keeps subcontractors from coming after your money if bills go unpaid.

The Federal Trade Commission has issued a warning to homeowners to help spot disreputable contractors and scammers looking for your business. Here are a few telltale signs of a shady contractor. He or she:

• Goes door-to-door soliciting business.
• Wants the names and phone numbers of friends and neighbors who may need service.
• Offers a discount for using "leftover materials."
• Only takes cash payments.
• Is unable to get the proper building permits.
• Has an unlisted phone number.
• Considers your project a "demonstration job."
• Uses high-pressure and intimidating sales tactics.
• Offers guarantees without any paperwork to back them up.
• Wants the payment up-front and in full.
• Offers financing through a "personal friend" or acquaintance of the contractor.

Remodeling can make you feel like your home is brand new and can add thousands to its resale value, but without doing your homework before hiring a contractor, you could be left regretting your decision for years to come.