What is a Bonded, Insured, and Licensed Contractor?

When a company offers services, it is easy to note that the company is licensed, insured, and bonded but people are not certain what that actually means. People only know they should hire a contractor who is bonded, licensed, and insured but are not sure about the reason why?

A professional who is not insured or licensed will be cheaper to hire but don’t be motivated to hire him because with them comes all the risks and responsibilities if in case something bad happens. Read to know why and how?

What Does Bonded Mean?

Being bonded and insured means that the company which is bonded has secured money that is available to the consumers in a situation of filing a claim against the company This secured money is in control of the bond, state and is not under the company’s control. For instance, you hire a house cleaning company and the worker steals your Nintendo Wii, you will file a case against the company and after all the investigation is done you will be paid out of this bond.

This is similar to a contractor being bonded. When an individual is bonded that means he has been properly investigated by the company for a background check and found that the individual is trustworthy and good enough to get insured. 

Generally when the employee handles a large amount of valued property, like art or jewelry or a large amount of money. A very extensive and deep background check is done to give the employee insurance confirming that he won’t steal. 

In case the employee takes something the bonding company pays the amount of this theft. 

Licensed

For many professions, it is necessary to show license to prove that you are competent and legally permitted to do certain business or jobs in the city, state, or municipality in which the license was issued. 

For instance, home improvement contractors, or carpenter license is necessary to perform certain works and the license number is also printed on the advertisements they print. You can note down this license number and check their performance history in your state and also others through the Better Business Bureau.

Insured

 Being licensed and insured is a very common term and is understood by almost all. Insured relates to what happens n case a worker or employee gets hurt while working on the job. For instance, assume you are hiring a contractor for constructing your house or fixing a roof, and at that, the roofer falls on the contractor and hurts him. In this case if the company is not insured, then the claim will be filed against the insurance of the homeowner. In this scenario, if the company is insured the claim will be filed against the contractor company’s insurance.

When hiring a contractor it is important to check if they are licensed, insured, and bonded. There is no reason to motivate you for working with someone who does not have a license or insurance. A licensed and insured contractor means they are truthful and safe to work with. Always verify the documents if the person says he is bonded or licensed do not go just by their words.

what is a contractor bond or what is bonding insurance?

Contractor bonding protects the consumers in case the contractor fails to do the job, or does not meet the financial obligations (paying for subcontractors, supplies or damage cover for a damaged caused to your property by subworkers), or does not pay permits. Experts say that to be bonded a company has to pay a premium to the surety company before hiring a contractor you can ask them for bond certification and number to confirm that he is appropriately bonded. You can also contact the surety company to check if the contractor bonding work is completed or subpar.

Bonding requirements vary depending on the municipality and state you live in, therefore it becomes important to do proper research before hiring a contractor.

Contractor’s insurance

There are two types of insurance that are common: worker’s compensation and liability insurance.

Liability insurance provides coverage for situations when the contractor causes damage to the homeowner’s property. This insurance will not pay for replacement or repairing shoddy work. This is covered in bonding insurance.

Workers’ compensation provides payment for the lost wages of injured workers and their medical services regardless of the person’s fault. Workers’ compensation also provides coverage benefits to the family of the contractor in the event of the contractor’s demise.

It is also important to make sure that the company is properly insured to ensure a satisfactory project in the long run.

Ask the contractor to show the insurance certificates and make sure the policies are current.

Contractor licensing

While you working on ensuring if the contractor company is bonded and insured do take out time to inquire whether that particular trade requires the contractor to get licensing done.

Some states require specific licenses for particular professions or trades, like plumber, electrician, or HVAC. to check the local or state requirements you can search online for the license policies.

In many localities or states, the contractor cannot get insured and bonded without a trade license. Also, be careful that the building inspector can stop the work mid-project if it is being done by a non-licensed contractor.

It may seem like extra work to find a properly licensed, insured, and bonded contractor but this work will all add up in the future to protect your interests and will provide assurance that you have hired a reputable and reliable professional.