Licensed, Bonded, and Insured? What Does This Even Mean to a Homeowner?

When dealing with a project affecting both your place of living and the weight of your bank

account, it is crucial to find a professional that can ensure the utmost care and responsibility in

finishing it. There are three key words to watch out for when hiring a contractor: licensed,

bonded, and insured . As a homeowner, these three key words indicate to you that the company is

both professional and trustworthy. Not only do they have the correct professional licenses

demonstrating their verification of compliance with government standards, but they also have the

financial stability required to complete contracts.

What Does it Mean to be Licensed?

Becoming a licensed contractor is a very extensive process that slightly varies from state to state.

The contractor must first determine specifically what kind of contractor that they are: a general

contractor , a specialty contractor , or a mechanical contractor . From there, they then have to fill

out a license registration application for each state in which they do business. For reference, here

is Alaska’s Contractor License Registration Application . The next steps are lengthy and could

take a bit of time. A contractor license bond and liability insurance must be acquired, followed

by showing proof of Worker’s Compensation Insurance, paying licensing fees, getting the

business itself licensed, and finally submitting all necessary documents and the license

registration application to the state. In short, being a licensed contractor shows a very high level

of professionalism.

What Does it Mean to be Bonded?

Being bonded means that the contractor has purchased a surety bond . A surety bond is usually

purchased through an insurance company and guarantees that the contractor will adhere to the

laws surrounding their trade, such as the numerous codes and regulations. The bond itself is used

in the case of the contractor not seeing the job through to completion or the work not being done

to code/regulation. The client would then use the money from the bond to hire a new contractor,

and the initial contractor will be responsible for the reimbursement of the insurance company

according to the agreement made when purchasing the bond. This all means that if the person

you are looking to hire is bonded, the job will be completed no matter what.

What Does it Mean to be Insured?

Being insured as a contractor signifies that they have coverage for legal expenses and coverage

for payment to a client in the event of damage to their property or sustained injury. One of the

most common forms of a contractor’s coverage is General Liability Insurance . Under General

Liability Insurance, the contractor has the benefit of asset protection. This ensures that they are

covered when a third party claims that the contractor caused harm to a person or damage to their

property. By being covered and protected, a client is reassured that if the unexpected happens, no

one will have extreme bills to pay out of pocket and everything will be taken care of.

By recognizing that a contractor is licensed, insured, and bonded, it shows that they are an expert

in their field and can alleviate any doubts that hiring a professional was a bad move.