Is it smart to do work on someone's house without business insurance?

[FIRE Realtor]

Hi,

I'm trying to figure out side jobs for extra income, but am having a disagreement with my husband.  (Read our case study here:  http://forum.mrmoneymustache.com/ask-a-mustachian/case-study-life-dilemma-jobcarcommutingstudent-debtpregnancy/) 

Husband currently works a desk job but used to be a painter and even ran his own commercial painting business at one point, mostly the inside of apartments in between tenants.  So for me the obvious solution would be to advertise around the neighborhood, or on craigslist, to do smaller indoor house painting jobs. 

He claims that you're just asking for trouble doing this without insurance, that people can be so picky about the smallest things and then refuse to pay you or sue you if they think you did something wrong. 

With my very limited knowledge, I feel like the risk of this is small, my dad did all kinds of remodeling projects for people under the table when I was growing up and I don't remember any big problems. 

Thoughts?

[MayDay]

I do garden work under the table. I suppose I am at risk for not getting paid, but the most I ever let build up was 500$ owed, and if I lose that, oh well.

I figure the risk is more on the homeowner. If I fall off a ladder trimming their tree, I could sue them.

Someone correct me if im wrong, please.

[Thegoblinchief]

I do garden work under the table. I suppose I am at risk for not getting paid, but the most I ever let build up was 500$ owed, and if I lose that, oh well.

I figure the risk is more on the homeowner. If I fall off a ladder trimming their tree, I could sue them.

Someone correct me if im wrong, please.

What MayDay said. Typically the concern is on the homeowner/customer, because THEY don't want YOU suing if you get injured on their property. Hence why reputable contractors advertise they are "bonded and insured".

[Milspecstache]

Painting is on the lower end of the risk spectrum (with tree cutting on the higher, for instance) with regards to insurance.  I would think if you have a good reputation and do work locally then you shouldn't have too much to worry about.

[MayDay]

Painting is on the lower end of the risk spectrum (with tree cutting on the higher, for instance) with regards to insurance.  I would think if you have a good reputation and do work locally then you shouldn't have too much to worry about.

To clarify in case anyone is worried about my safety ;) I don't do serious tree work, mostly trimming small ornamental trees. It would be really dumb to do major tree work without insurance.

[Greg]

I figure the risk is more on the homeowner. If I fall off a ladder trimming their tree, I could sue them.
Someone correct me if im wrong, please.

Ok, actually anything would be covered by their homeowners.  Which is why it's a risk to hire unlicensed contractors.

My favorite story about this is the sister of the accountant at my lumberyard hired an unlicensed painter to do the outside of their house.  First hour there he fell and was very hurt with a serious back injury (nearly paralyzed), they had to pay (homeowner's) and of course their rates went up.  So I tell that story to anyone.

Being a licensed contractor means I pay sales and other taxes, unemployment, workers comp etc. so I can't compete with under-the-table workers on price, but quality and reputation make up for it.

[Greg]

In general, it depends on your area.  In my area, the folks who license contractors peruse message boards for people who advertise this kind of work but aren't insured and bonded (which in my area = licensed).  So be careful... it can be risky.  Word of mouth is the best advertizing.

As for getting paid, you can still have written agreements that spell out who is doing what for how much, and they can specify things like that the customer chooses the color.  I always ask for a deposit equal to about 50% on small jobs, so I don't get screwed.

[paddedhat]

To clarify in case anyone is worried about my safety ;) I don't do serious tree work, mostly trimming small ornamental trees. It would be really dumb to do major tree work without insurance.

You would be amazed at how many idiots will HIRE a tree guy specifically since he is dirt cheap due to not being properly insured. I know a local, hard core alcoholic that brings in a couple of grand a week in cash, for doing removals. If he is not in jail, or has a running vehicle. In another local case, a homeowner hired an uninsured illegal to do a tricky removal, for cash. The guy ended up killing himself while working on her property. The local D.A responded that she is culpable in his death, and is charging her with whatever he can.

As to the OP, this is a thread about a non-issue. I just retired from my custom homebuilding business. My most recent business liability insurance for a million in general contracting liability, was less than $800. Some of my low risk subs paid half as much. 

[FIRE Realtor]

You are saying he could probably get insurance for about $400/yr.?

[paddedhat]

You are saying he could probably get insurance for about $400/yr.?

Yes, my trimmer and painter are both "one man bands" who pay roughly that amount for a million in coverage. After a year or two of being covered, you might get audited by the company to see if your scope of work and dollar volume fit within their expected range. If you say your a painter, and end up doing roofs, or if you say your generating $50K per year in billables, and it's actually 500K, well then all bets are off. you might get dropped, or you might end up paying a lot more. Generally, as a small time contractor, in a fairly low risk endeavor, insurance is quite reasonable. That said, you have to shop like it's a mission. I worked hard to find a reasonable policy, with a decent company. I currently have Erie, but spent a short time with Donegal, and they sucked beyond belief.

[rusty]

You likely need liability insurance ("on premises" and/or "products completed").  Basically protection for something you do.  Here is an example I had when I sold property insurance.  Painter was painting a building outside.  He was using a spray gun and did not stop to check for wind direction.  At break time, he realized there were a large number of cars in the parking lot with a very fine mist of white paint all over them from the wind drift.  His liability insurance would pay for damage he did when he was performing his job. 

On premises is an example above.  Products completed would be damaged cause after the job was done and the worker left.  Products completed was usually more expensive.  On premises premium depends on your line of work (risk involved).  I doubt "indoor painter" would be much for $1,000,000 liability coverage per year.  Couple hundred per year, maybe.

[iris lily]

Hi,

I'm trying to figure out side jobs for extra income, but am having a disagreement with my husband.  (Read our case study here:  http://forum.mrmoneymustache.com/ask-a-mustachian/case-study-life-dilemma-jobcarcommutingstudent-debtpregnancy/) 

Husband currently works a desk job but used to be a painter and even ran his own commercial painting business at one point, mostly the inside of apartments in between tenants.  So for me the obvious solution would be to advertise around the neighborhood, or on craigslist, to do smaller indoor house painting jobs. 

He claims that you're just asking for trouble doing this without insurance, that people can be so picky about the smallest things and then refuse to pay you or sue you if they think you did something wrong. 

With my very limited knowledge, I feel like the risk of this is small, my dad did all kinds of remodeling projects for people under the table when I was growing up and I don't remember any big problems. 

Thoughts?

DH has been doing small construction, carpentry, and handyman work for 12 years. I made him get liability insurance. It covers his work but he is not allowed to do roof and electrical work under it.

In 12 years had has not had a problem. Which doesn't mean that he hasn't had things that go wrong that he's got to go back and fix, but people are reasonable. One big advantage: he works for people whom we know. He works for friends, friends of friends, and for clients of our friend who sells real estate. He doesn't advertise, he doesn't solicit business, they come to him.

[Erin]

As to the OP, this is a thread about a non-issue. I just retired from my custom homebuilding business. My most recent business liability insurance for a million in general contracting liability, was less than $800. Some of my low risk subs paid half as much.

My husband is a floor covering installer and he just started it up again (after a 5 year break). His liability is also less than $800/annually with 1 mil coverage. The start-up costs for this business venture were nuts, but in 6 weeks we're already far ahead. I think it's worth being insured, but that's because I'm a paralolyer and am overly paranoid about being sued. I'd get the insurance (if that makes him feel better about it) and go for it. I agree that painting is low risk, but clients are crazy and getting more sue-happy by the year.

[AMustachianMurse]

As to the OP, this is a thread about a non-issue. I just retired from my custom homebuilding business. My most recent business liability insurance for a million in general contracting liability, was less than $800. Some of my low risk subs paid half as much.

My husband is a floor covering installer and he just started it up again (after a 5 year break). His liability is also less than $800/annually with 1 mil coverage. The start-up costs for this business venture were nuts, but in 6 weeks we're already far ahead. I think it's worth being insured, but that's because I'm a paralolyer and am overly paranoid about being sued. I'd get the insurance (if that makes him feel better about it) and go for it. I agree that painting is low risk, but clients are crazy and getting more sue-happy by the year.

What crazy start-up costs are you referring to?  I'm always interested in learning about various opportunities for starting businesses.  But I find a lot of times there are a ton of costs that no one ever considers until they start doing it.  Your information would be great to know to keep the people I know attempting to do stuff like this grounded, and safe financially.

[Greg]

This local news "article" warns against some of the hazards, I was particularly interested in the part about some insurance not covering workers in your home. 

http://www.king5.com/news/get-jesse/Plan-ahead-before-hiring-day-laborers-257433031.html

Also, in Washington handy-person contractors who don't do a lot of business can get insurance and registration at reduced rates. Might be available in other states as well.

With the recession, I've heard horror stories of handy-persons getting stung by our L&I for working unlicensed/unregistered and also for doing things like plumbing and especially electrical that are licensed separately.  The fines are impressive.  They look for flyers on bulletin boards and if you mention being able to help with these kinds of things it's against the law, unless you are a licensed plumber or electrician.  Doing it for yourself is not what they're talking about, but doing it for others for pay.