How to Make Sure Your Contractors are Properly Licensed and Insured
One of the most important things you can do to protect your interests and your family’s financial security is to take the necessary steps to ensure you hire fully licensed, bonded, and insured contractors.
Secondarily, make sure you are properly insured with either a builders risk policy or by increasing your dwelling coverage when doing major additions or renovations.
Why is Hiring Licensed, Bonded and Insured Contractors So Important?
Whether it involves contractors, landscapers, painters, or even the guy who comes to clean your pool, proof of insurance is critical when people are working on or around your home.
Say you hire XYZ Painting to paint the exterior of your home. The company sends two painters to take care of the job, and one of them falls off a ladder. If the contractor was not insured, you might be held financially responsible for the injury since it occurred on your property. If the company has insurance, the company will have the primary financial responsibility for the injury.
The two types of insurance of particular interest to you in this situation. You want to make sure the contractor has both of them before hiring one to work on your home:
- Liability Insurance Protection
- Workers’ Compensation Insurance
Ask for an Acord certificate of insurance when hiring contractors. For additional protection, you may want to request that they add you as an additional insured to their liability coverage.
What Does it Mean When a Contractor is Bonded?
There is a considerable difference between bonded and insured. Insurance protects you from liability if a contractor or one of his employees is injured on your property. Bonds protect you if a contractor fails to complete the job he did on your home or if he did the job improperly.
Bonds also protect you if your contractor fails to pay subcontractors or suppliers when working on your property. It also protects damage his workers do to your property while working on it, and offers protection if the contractors fail to pay for permits.
Why is Licensing so Important?
After all, not all states require contractors to have licenses, can it really be that important? If you live in NJ licensing is required. If you use an unlicensed contractor, you may have difficulty selling your home in the future.
However, the peace of mind that going with hiring a licensed contractor provides is worth consideration. Contractors who go through the trouble of obtaining a license from the state have shown that they take their trade seriously and are far less likely to risk their reputation and license by doing inferior work on your home.
How to Check if a Contractor is Licensed and Insured
Contractor not insured? Checking for a license is generally a simple matter. Ask the contractor for his or her license number and then check with your state’s licensing board to verify the standing of the license. If you live in New Jersey, you can check the Division of Consumer Affairs.
Ask for a certificate of insurance. You can call the insurance company once you’ve seen the certificate to verify that the insurance is current and to learn about policy limits.
For a bond, ask for the bond number and certification then verify with the surety company that the bond is appropriate for your needs. By doing this, you already have the information for the surety company If something goes wrong and the contractor is responsible.
Taking the steps above can give you peace of mind when hiring contractors to work on your home, but you also need to have a backup plan in case things go wrong. Make sure your homeowner’s policy is up to date and that the people working on or around your property are covered by your policy if they are injured, and the insured contractor’s policy is insufficient to cover the damages, expired, etc.