How to Verify a Building Contractor is Licensed, Bonded, and Insured?
Having a contractor with the right credentials can be the difference between a happy experience and a nightmare. Making sure a company meets the basic requirements to do business in your area is an essential step in the decision process.
Before choosing a builder, ask for documentation proving they are Licensed, Bonded, and Insured. Make sure it is all current and complete.
Let’s define what these things mean.
Licensed – Contractors have been granted a trade license as mandated by state and local laws. It generally requires passing competency tests about business practices and trade skills, paying a fee and proving insurance and/or bonding.
Bonded – Contractor has an arrangement with a private bond issuer. People may petition for reimbursement through that bond issuer if contractor harms them financially because of shoddy work or failure to pay subcontractors as promised.
Insured – Contractor or business insurance will usually fall into two types. Make sure they have both:
1. Liability — Covers property damage and injuries caused by the contractor’s work. It will not normally pay the cost of repairing or replacing bad work; that’s the purpose of the bond.
2. Workers’ Compensation — Provides payments to injured workers, without regard to who was at fault in the accident, for lost wages and medical services. It also provides benefits to the contractor’s family in the event of death. If the owner is the only employee, workers’ comp may or may not be required, depending on the state.
Any contractor you hire should be licensed, bonded, and insured. When interviewing a prospective company, ask to see their proof of all three. Then, verify each yourself. It’s better to be safe than sorry.
