What does Licensed, Bonded, & Insured Mean for a Contractor?

  • 4 min read

When you are looking for contractors to complete work on your home, it can be difficult to know who to trust. You want to find someone who is trustworthy and will do quality work with your budget in mind. So, what does Licensed, Bonded, and Insured mean when searching for a contractor? These certification marks can make all the difference in finding trustworthy contractors who will do quality work and leave you feeling confident in their abilities as a contracting business. In this article, we’ll discuss what these terms mean, how they impact you as a customer, and what red flags you should look out for when hiring contractors.

Licensed Contractors

The first step in finding contractors is ensuring that they are licensed. You can find this information on the contractor’s website or by searching for their business name in your state’s Contractor’s Directory. A contractor license signifies that a business is properly insured to work on your home. While you may trust a company’s reputation, you may not know if they have the proper coverage to complete work on your home. This can be a major concern especially if you have expensive fixtures or improvements being completed. A contractor license helps you know that the company has met the minimum requirements for doing business in your state. You can also use the license number to check if there are any reported issues or complaints against the business. A license shows potential customers that the business has met industry regulations and has the proper insurance to complete work on your home.

Bonded Contractors

A contractor bond is issued by a bonding company that can be used to cover any damages that may occur during the construction of your home. A contractor bond is a form of insurance that is used to protect the general contractor and other parties involved in the construction project. If a contractor is bonded, they will be required to pay a premium. This amount is put on hold until the project is completed. If there are any damages, the bonding company will use the money from the contractor’s bond to pay for repairs. This is helpful to a construction customer because the bonding company will cover any damages that may occur during the construction. If there are no damages, the premium will be returned to the contractor at the end of the project.

Insured Contractors

While a contractor bond protects a contractor and a construction project, a contractor insurance policy will protect a customer from any damages. The construction insurance policy is also known as a workman’s compensation policy. The workman’s compensation policy is used to protect a construction company and its employees while they are on the job site. If there are any damages that occur during the construction of your home, the contractor insurance policy will cover the costs of repairs. This is helpful because the construction insurance policy will protect you as a homeowner if something happens during the construction. If there are no damages, the premium paid for the construction insurance policy is a small investment for protection against costly repairs.

Red Flags to Watch Out For

When hiring contractors, it is important to watch out for red flags that indicate a contractor may not be trustworthy. Some of the most troubling red flags include contractors who: 

  • Offer extremely low prices 
  • Require cash payments 
  • Are unable to provide a license and insurance information 
  • Have complaints against their license 
  • Have no bond or insurance policy 
  • Are difficult to contact or return calls 

If a contractor has all of the previously mentioned certification marks and you feel that they are trustworthy, then you are ready to move on to the next step in the process.

Conclusion

The process of finding a contractor can be daunting. It’s important to know what to look for when hiring contractors. When searching for contractors, make sure that they are licensed, bonded, and insured. A contractor license will show that a contractor has met the minimum requirements for doing business in your state. A contractor bond will protect a contractor and a construction project. A contractor insurance policy will protect a customer from any damages that may occur during the construction of their home. These three certifications will help you find trustworthy contractors who will do quality work on your home.

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