New Product Promises to Protect You From Bad Contractors

Gut renovation of homeNew company Bolster offers customized remodeling project insurance to protect homeowners from contractor troubles during big renovations, like this two-story transformation. Image: WolfeStreetProject

It’s scary to sign a big remodeling contract. Even if you check your contractor’s licenses and references, it’s natural to worry that his work won’t be up to par, he’ll take your deposit and disappear, or he’ll tell you the cost has gone up halfway through the project.

A new startup company, Bolster, is capitalizing on that fear with a novel product that combines an online project management tool with insurance to protect you from disappearing contractors, unjustified price increases, shoddy workmanship, and project delays.

Here in my home state, Maryland, we already have that product — it’s called a surety bond — and all licensed contractors have to post one. If I hire a licensed contractor who walks away with my money or screws up my project, I can file a complaint and the Maryland Home Improvement Commission will tap the contractor’s surety bond to pay to finish my project.

The problem is the bond only covers $50,000. In New York, where Bolster did its soft launch, it’s even less: $20,000.

That’s fine for small jobs, but it’s not going to do much for a homeowner in the middle of a $100,000 remodel when the contractor goes bankrupt and abandons the project.

Bolster founder and CEO Fraser Patterson wants to fill this gap. A former contractor himself, he was teaching at a university in Mexico City when the Mexican federal government sponsored a contest to find the best idea for reducing home remodeling project risks and improve the performance of home equity loans.

Patterson won the competition with his idea to provide insurance that’s customized for each individual remodeling project. After an apparently successful run in Mexico, he moved the concept to New York and now plans to launch it in other cities next year.

Along the way, Bolster picked up the American Institute of Architects as a partner, which is part of their marketing strategy. Architects will advise both homeowners and contractors to sign on with Bolster, while Bolster will encourage homeowners to work with architects.  

Related: Should You Hire an Architect?

Contractors will have to supply financial information, prove they have the skills they’re hired for, and demonstrate that their business is trustworthy.

And — this is key — contractors will be vetted for each project. A surety bond is more of a one-size-fits-all approach, with no vetting for each project.

Will Contractors Agree?

To find out how contractors might react to this kind of scrutiny before they can bid on a project, I talked with my friend Steve Lamm, a Laurel, Md., contractor. He says he has no problem with more scrutiny.

The only issue would be that it costs him about $200 to get his accountant to complete a typical financial disclosure. Plus it’s extra paperwork on top of what he has to do to get a contractor’s license. And even though he’d probably pass on the cost to the customer, it still might not be worth it just to bid on one small job.

Which may be what Bolster is after: the higher-end jobs with higher risk to the homeowner. Patterson estimates only 25% of contractors will pass the financial test, which is going to leave 75% of contractors pretty unhappy with the company.

The bottom line? When you’re checking with the state to make sure the contractor you’re using is licensed, see if contractors have to post surety bonds and how much those bonds cover. If you’re doing a project with a higher cost than the bond, Bolster might give you some peace of mind.


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