Uninsured Handyman?
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Insurance Agent · AZ · Member since 2013 · 306 posts · 161 votes
10yI can say this, having worked doing insurance claims for many years; you can have people sign all the waivers you like, and it MAY help you for the final outcome, but it does NOT stop them from filing a lawsuit against you, and you DO need to answer that lawsuit and handle it; therefore, the price you pay for attorney's fees, etc, can far exceed you having made sure your handy person has insurance.
It all sounds good to have this person who you pay $10, $12, $15 an hour and you're saving money, and yes, nothing may NEVER happen...until it does. Regardless, you are going to pay some money if a claim/lawsuit is filed, and I can almost guarantee you that the cost of defense can cover you paying insurance for a handyman for a long, long, time. Just my .02.
Additionally, with my clients who hire subs. I always recommend to them (whether they listen to me or not is a different story) that if a project goes longer than expected, that they have their subs resubmit proof of insurance. I know (gasp) it's hard to imagine, but sometimes people in general (not just subs) will get insurance in place to get a job, and then cancel the policy the next month. They've been able to provide proof of insurance for the job, but then don't pay for any additional insurance. Many contractors have caught subs doing this...and without going into a long and detailed explanation about this, the short story is - it's a bad, bad situation should there ever be a lawsuit. It's hard enough when everyone has the insurance that they are supposed too, because insurance companies will fight amongst one another so they don't have to pay; so imagine what happens when YOU are the only one who has insurance or worse - you don't.
33 Replies
- Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes10y
I don't know your state laws. I would definitely hire only licensed people. You might ask for some legal advice concerning liability hiring unlicensed people. I recently had someone offering to rescreen a pool cage for me. They stated they had fallen on a job in Naples and went to an attorney to sue the homeowner! They may or may not win but who wants to go through the aggravation? Last, if your handyman does work that is not correct (wiring, etc) and causes a fire what would your insurance company do? There are too many unknowns!
- Dacono, CO · Member since 2016 · 12 posts · 3 votes10y
Hi Julie,
I don't hesitate using whoever I can get the job done and done right. I have used craigslist in the past and I post the job i need done and what i am willing to pay for the job. You would be surprised on how many people want work and can do the work. They just don't carry liability insurance. Just remember it is craigslist and you have to be blunt and up front on what you want and what YOU will pay. I tell them upfront if they do not do the job to my satisfaction they do NOT GET PAID. My rental property needed 4 rooms painted, a hole patched i was contacted by a guy who owned a Restoration Company in Colorado Springs that needed some work for their 3 guys. They drove from the Springs to Northglenn to do the work and it took them 12 hours to finish it. I bought the 5 gallons of paint and they brought everything else, i only paid $500 for the job. They did an outstanding job. My ad read if you get paint all over the floor or windows you will not get paid. You will get the normal craigslist crazies you will have to weed through.
So your handyman charges you a $800 a year premium?? Then you still pay the $12 an hour for whatever you need done? What does that $800 premium get you?
- Insurance Agent · Maitland, FL · Member since 2015 · 397 posts · 244 votes10yThe "Law of Business Balance" states: "There is hardly anything in the world that someone cannot make a little worse and sell a little cheaper, and the people who consider price alone are that person's lawful prey. It's unwise to pay too much, but it's worse to pay too little. When you pay too much, you lose a little money – that is all. When you pay too little, you sometimes lose everything, because the thing you bought was incapable of doing the thing it was bought to do. The common law of business balance prohibits paying a little and getting a lot – it can't be done. If you deal with the lowest bidder, it is well to add something for the risk you run, and if you do that you will have enough to pay for something better."
- Investor · Ventura, CA · Member since 2016 · 264 posts · 70 votes10y
My solution was to pay for the insurance. In my case it was about $1000 for the year. My guy is $25 an hour. The GC is way more expensive and simply too busy at certain times of the year to want to come do a small job for me. Plus by paying for the insurance he knows I value him. When I call he is there.
- Investor · PA · Member since 2013 · 1k+ posts · 602 votes10y
If the handyman has done work for you before and is trustworthy enough then I'd assume a good liability policy on the home itself might be insurance enough. Would definitely do some kind of background check and get verifiable references if it is someone new. If no one is there watching him then he might leave early and say he worked a full day or sit around and do nothing especially if all he is getting is 12 an hour.
- Colorado Springs, CO · Member since 2016 · 59 posts · 33 votes10y
If your handyman is injured on the job and isn't self-insured, you could expect to receive a large medical bill. Let me just say, that is not always part of your Liability coverage depending on your insurer. That's typically Guest Medical coverage and unless you've attained the right policy, you could watch your hard work disappear. Unless they file a lawsuit, your liability coverage doesn't always kick in for this sort of stuff. Just imagine your handyman is trying to repair a broken window, cuts himself, goes to the hospital and get stitches, then hands you a $10k medical bill (your his employer, so of course you get stuck with the bill). Most homeowners don't have an extensive Medical Coverage for this cost, so you could still eat a $5k med bill cost. Add in, the moment you pay for it, you accept the liability of the work completed. Some shady people may use this as their opening to filing the lawsuit against you and add on to the headaches.
My opinion here, pay for someone who is in the actual business of doing repairs and property maintenance. If they are insured professionals, you know they will get the work done right and if not, you have an avenue to pursue as a customer by filing suit against them. Sure, you can sue the uninsured handyman. But do you think you're going to get anything? Likely not, since they couldn't even afford the insurance.
- Residential Real Estate Broker · Chicago Suburbs, IL · Member since 2013 · 1k+ posts · 594 votes10y
@Christine Swaidan when you bought the workers comp and liability insurance, does your handymans name go on it? Or does the policy cover any handyman you hire? Do you just cancel the policy in between jobs to save on insurance premium? We've struggled with the whole handyman/hiring uninsured people issue for small jobs and haven't come up with a good solution yet.
- Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes10y
Not all work requires a license. In fact, there is a lot of work that doesn't necessitate a license. For exampling in most locations simply painting does not require a license. There is the liability of lead paint so it's obviously not always clear cut.
There is the liability if the worker gets hurt. In addition, there is the liability if they do damage. What if your $12/hr guy spills paint on the new carpet? Who pays for that? What if the handyman/painter scrapes lead paint and gets turned into the Department of Health? Who pays the fines for lead paint violations.
You are probably paying your $12/hr guy by the hour and providing some tools. Workmans comp says he would be an employee. You would owe taxes and workers comp on him. Again probably won't come up until he gets audited because he didn't pay taxes on his income. The IRS will then say well he was an employee (of yours) because they know he can't pay but they know you can pay.
My suggested route would be for you to create a maintenance company and hire him as a part time employee. Get liability insurance for the company and pay workers comp on the guy.
Additionally, do you have a real estate license? If not and you are managing property for others you are in violation of the state law. That's probably not going to get you in trouble until a tenant turns you in because they didn't get their SD back the way they thought they should. If you don't have a license you can legally "manage" the properties but you can't be paid for it and you can't handle any money. In reality, it's not worth the hassle to "manage" 6 properties for others.
- Investor · Ventura, CA · Member since 2016 · 264 posts · 70 votes10y
@Kimberly H. The policy has his name on it but it only covers him when he is working on our properties. We have old buildings so we probably have him working a couple of days a weeks on average. I ran our situation by the firm that does our payroll and they didn't think it was necessary to add him as a employee and give him a W-2 each year but I got the impression that it could go either way. I depend on these professionals to give me accurate advice. I hope they are!
- Residential Real Estate Broker · Chicago Suburbs, IL · Member since 2013 · 1k+ posts · 594 votes10y
We don't have nearly that much work at all for handyman, maybe one day a month if that. Based on the research I've done, the whole line between part time employee versus W9 contractor is blurry. Hopefully they told you to at least get him to fill out a W9 so you can 1099 him.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes10y
Originally posted by @Kimberly H.:
We don't have nearly that much work at all for handyman, maybe one day a month if that. Based on the research I've done, the whole line between part time employee versus W9 contractor is blurry. Hopefully they told you to at least get him to fill out a W9 so you can 1099 him.
Spot on advice from Kim. Regardless of how much you expect to pay them, have them fill out a W9. That establishes them as a contractor. Liability insurance is not what defines if someone is a contractor or not, but generally businesses require their W9 contractors to be licenced and insured. Handyman often are not just because they are not doing actual construction work. Usually they are repairing things.
On a side note, I would hesitate to pay someone $12 as a contractor. This is well below fair market value for a handyman. My guess is they are not claiming the income on their taxes, so make it clear when they complete the W9 that the income is reported via 1099 to the IRS. Underpaying people is a bad business practice. It is one thing to get a good deal, but taking advantage of people isn't a good formula for success. I always pay a fair price for work that is being done.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes10y
Originally posted by @Julie O.:
Fellow landlords, I'm wondering if you all worry about hiring "handyman" type help around your properties? Do you worry about hiring someone that doesn't carry liability insurance? In addition to the 4 rental properties that I own, I've somehow ended up managing 6 more homes for other investors. In the past, my licensed and insured GC has helped out with small jobs for me, but our market here in the Denver area has gotten so busy that he just doesn't have the time for this any more. I'm considering paying the $800 per year premium for my new handyman, I'd welcome thoughts about this. Handyman charges $12/hour, my GC is $75. Do you all think it's worth it? Do you hire uninsured help to work on your properties and just rely on your own homeowner's policy for coverage?
Someone payed $12 could be viewed as an employee just due to the low wage. My advice is to pay him a fair hourly rate. COSTCO pays $12 for a checkout clerk! This guy is either not paying taxes or is horribly undervaluing his services. If he gets hurt at the wage you pay him, it would be easy to argue he was a part time employee.
- 10yScott TrenchPro MemberRental Property Investor · Denver, CO · Member since 2014 · 2k+ posts · 6k+ votes
Maybe I'm a noob here, but I hired a handyman to do some painting on my two rental properties. I have no idea if he is insured and I'm not sure why I would care - I don't understand why the type of work I'd hire a handyman for would need that type of insurance - it's paint and drywall mostely, with the occasional odd job (new mailbox cover, for example)! In this example, he painted with paint that I bought, and did a great job. I think @Bill S. makes great points about $12 per hour vs $20 per hour+ guys. I paid a little bit on the higher side, and was delighted with the results.
But I don't know and I don't care if he was licensed or insured. The only thing I think I risk is having to redo the paint and maybe some of the carpet for that type of work!
I will, however, only work with licensed and insured guys on rental property plumbing and electrical, roofing, HVAC, etc.
- Residential Real Estate Broker · Chicago Suburbs, IL · Member since 2013 · 1k+ posts · 594 votes10y
Because people get hurt working and can become disabled or unable to work. That's what workmans comp insurance is for. The injured persons personal injury lawyer will sue whatever they perceive as the deep pocket for that money such as the homeowner or investor. You definitely want to make sure that's in place for high risk things like work on ladders, roof, etc. Your level of paranoia dictates who you check for it.
- 10yJulie O.Real Estate Investor · Westminster, CO · Member since 2012 · 25 posts · 18 votesOP
Thanks everyone for sharing with me how you all do things! Just to answer a few questions, I have had him do a W9, he's not an employee. Also, I pay him $12 because that's what he asked for, that's what the other property owner he works for pays him. Based on all of your responses, I think I'll go ahead and buy him this policy, just to be safe.
- Investor · Ventura, CA · Member since 2016 · 264 posts · 70 votes10y
Thank you to @Joe Splitrock and @Kimberly H. Just when I think I finally have a handle on all this real estate stuff I find out how little I know. Lots of regulations to keep track of. I may take on the handyman as an employee because CPA says if I pay workman's comp he's supposed to be an employee.
So thankful for all the great advice!
- Real Estate Investor · Desoto, TX · Member since 2013 · 560 posts · 528 votes10y
I find it hard to believe that most landlords would require a handyman to be licensed/insurance for every single little task. I would be curious to see how many people chime in who have actually been sued by a handyman injured on the job. Its like the slip and fall tenant, the due on sale clause. More fear than high probability. I bet most don't even physically verify licensing or insurance for jobs that actually require it.
- Investor · Ventura, CA · Member since 2016 · 264 posts · 70 votes10y
@Daren H. I think the probability is low but I do believe in insurance. I sleep better at night.
i like and respect our handyman and would want him taken care of if there was an accident.
- Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes10y
Originally posted by @Daren H.:
I find it hard to believe that most landlords would require a handyman to be licensed/insurance for every single little task. I would be curious to see how many people chime in who have actually been sued by a handyman injured on the job. Its like the slip and fall tenant, the due on sale clause. More fear than high probability. I bet most don't even physically verify licensing or insurance for jobs that actually require it.
I think you are right that most would not check or care if a handyman had insurance. Larger companies are more likely to care than mom and pop operations. I asked a handyman one time if he was insured. He laughed and said, "you think for what I charge I can afford insurance". To your point since he was doing light duty repair work, I didn't care. I do require contractors to have insurance and I call the insurance company to verify insurance is valid. Anyone can show you a peace of paper that says they have insurance.
The reason larger companies care is the more you have, the more you have to lose. I don't think a risk-adverse strategy is bad.
- Flipper/Rehabber · Golden, CO · Member since 2013 · 590 posts · 319 votes10y
What if he signed some sort of release? Would this help to protect? At the very least, it puts the idea in his head that he cannot come after you in the case that he would get hurt.
- Rental Property Investor · St Louis, MO · Member since 2010 · 317 posts · 72 votes10y
Originally posted by @Kyle Doney:
What if he signed some sort of release? Would this help to protect? At the very least, it puts the idea in his head that he cannot come after you in the case that he would get hurt.
Yes, I too am curious about the handyman signing a document indemnifying the landlord. IANALB wouldn't that be the trump card to squash a lawsuit from an ambulance-chasing attorney?
I truly doubt a release form is any real protection, but even if not, it can't hurt much to do it in a pinch. Those release forms I sign when I do a high-risk activity like white water rafting certainly make me think I have no options to sue if I get hurt, so it should work for handymen working on a rental house too.
Just my opinion, but hiring licensed/bonded workers is just the cost of doing business to avoid lawsuits and shoddy work.
- Flipper/Rehabber · Golden, CO · Member since 2013 · 590 posts · 319 votes10y
Great point @Paul Winka. Whats the difference between signing a high risk activity waiver and signing a waiver to work on my property? You sign your rights away to sue the company, correct?
- Insurance Agent · Maitland, FL · Member since 2015 · 397 posts · 244 votes10yKyle Doney You cannot waive laws. That's why it does not work. You owing workers comp is by state law. You owe it to society, not to the contractor. That is why in some if not most states the first injury without workers comp, when required, is a class A misdemeanor. Most prosecutors look the other way, but you make waves and they will make them right back. Now states are slowly allowing contractors to waive work comp when the form is filed with the state where back taxes, child support and other state costs are verified and paid prior to allowing the waiver. You really need to check out the law of business balance.
- Insurance Agent · AZ · Member since 2013 · 306 posts · 161 votes10y
I can say this, having worked doing insurance claims for many years; you can have people sign all the waivers you like, and it MAY help you for the final outcome, but it does NOT stop them from filing a lawsuit against you, and you DO need to answer that lawsuit and handle it; therefore, the price you pay for attorney's fees, etc, can far exceed you having made sure your handy person has insurance.
It all sounds good to have this person who you pay $10, $12, $15 an hour and you're saving money, and yes, nothing may NEVER happen...until it does. Regardless, you are going to pay some money if a claim/lawsuit is filed, and I can almost guarantee you that the cost of defense can cover you paying insurance for a handyman for a long, long, time. Just my .02.
Additionally, with my clients who hire subs. I always recommend to them (whether they listen to me or not is a different story) that if a project goes longer than expected, that they have their subs resubmit proof of insurance. I know (gasp) it's hard to imagine, but sometimes people in general (not just subs) will get insurance in place to get a job, and then cancel the policy the next month. They've been able to provide proof of insurance for the job, but then don't pay for any additional insurance. Many contractors have caught subs doing this...and without going into a long and detailed explanation about this, the short story is - it's a bad, bad situation should there ever be a lawsuit. It's hard enough when everyone has the insurance that they are supposed too, because insurance companies will fight amongst one another so they don't have to pay; so imagine what happens when YOU are the only one who has insurance or worse - you don't.
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