Learn How to Check and Verify a Contractor's License and Insurance

When you hire a general contractor to work in your home, you must be able to trust him or her to complete the job in full and on time. This means you need to be sure that your contractor has the proper license, insurance, and surety bond to complete the task. Use this guide to help you learn more about contractor licensing and how to check a contractor license to ensure it is legit.

The Basics of Contractor Licensing & How to Check a Contractor License

If you automatically assume a contractor is licensed or must be licensed to work, you could be mistaken. Each state has its own set of regulations governing what a general contractor needs to work and how to check a contractor license. While most states do regulate contractors in some ways, some states don't have any licensing laws, and even individual cities or counties can have their own laws.

At its most basic definition, a license means the contractor has registered with the agency and holds a minimum amount of bonding or insurance. Some cities, such as New York City, base their laws on a dollar amount. In the case of NYC, anything that costs more than $200 must be done by a city-licensed professional.

There are also trade-specific licenses and laws that regulate contractors in many areas. In many areas, a general contractor cannot perform certain tasks, such as electrical work, plumbing jobs, or HVAC tasks. If your job requires work of this caliber, you'll likely need to hire a specialist in addition to your general contractor, so you'll want to know how to check a contractor license.

The Breakdown of Contract Licensing Terminology

As you search for the right general contractor and learn how to check a contractor license, it helps to understand the terminology. Learning the definitions below will help you determine if a contractor has the right qualifications to meet your needs.

Bonded

When a contractor is bonded, he or she has a private bond issues by an insurer or licensing municipality. If the contractor fails to complete his or her job to your specifications, you can petition to the bond issuer for reimbursement.

Insured

An insured contractor is essential if you want to protect your property during the job. Always ask for proof of insurance, such as a certificate, and then call the provider to check that the policy is up to date and will cover your project.

Licensed

A general contractor who works on large projects in your home should have a valid trade license that meets local or state regulations. Contractors who have a license have typically had to take certain classes and pass competency tests plus prove they have an insurance policy.

Registered

A registered contractor hasn't gone through as much training as a licensed contractor but does still pay a fee and must prove he or she is insured. Some registered contractors are required to be bonded as well. Keep in mind that some locales use the terms "licensed" and "registered" interchangeably.

The Importance of Insurance

Preferably, your contractor will be bonded and have insurance. At the very least, he or she should have liability and workers' compensation coverage. Liability insurance protects your property and your family or friends in case the contractor or subcontractors cause damage or injury during their jobs. Workers' compensation is another essential policy. This policy ensures that workers who are injured on the job have access to compensation for lost wages and medical services. If your contractor doesn't have coverage for this, you could be on the hook for the expenses, especially if your homeowner's policy isn't substantial enough for these types of situations.

The Importance of Bonding

Although bonding is not always required, it is still important. A surety bond protects you if your contractor fails to complete the job, doesn't pay for permits, avoids paying his or her subcontractors, and so on. Without a surety bond, you could be on the hook for any bills a contractor doesn't pay.

It helps to know how a surety bond works. When a contractor purchases one, he or she must pay premiums, much like a traditional insurance policy. The premium depends on the amount of the bond as well as the contractor's history. Should you decide you need compensation from the bond, you'll need to contact the provider of the bond and show proof that the contractor didn't finish his or her job according to the agreement. To figure out how to check a contractor license, ensure your contractor is bonded by asking for the certification and bond number before signing a work contract.

How to Find Properly Licensed Contractors

When the time comes for you to find a contractor, the Better Business Bureau will help you learn how to check a contractor license. A BBB-Accredited Business must have proof that they are licensed, bonded, and insured. However, don't just rely on BBB information. Be sure to ask for proof in person as well.

Billy.com is another great starting point. The website provides information on how to check a contractor license, a list of local contractors' licenses and insurance, as well as consumer ratings, reviews, and references. This makes it easier for homeowners like yourself to wade through the list without needing to call each one individually.

Finally, don't be afraid to ask around the neighborhood. Talk to friends or family members who have had renovations done on their home in recent years, or even ask around on your neighborhood's Facebook group, if it has one.

How to Check a Contractor License

If you aren't sure how to check a contractor license or where to begin, you have several options. Beyond checking the Better Business Bureau, you can ask for a potential contractor's trade license number and proof of bonding or other insurance. After you have the necessary information, you can visit your state's licensing board website to verify the license. Keep in mind that not all information will be online, so you may need to call or even visit the office in person.

Once you settle on a contractor who meets all the legal requirements to work on your home, ensure you keep copies of his or her paperwork, including the contract, all communication, and proof of payment. This will be helpful in case you run into a problem.

When it comes to learning how to check a contractor license, it may be tempting to hire someone as quickly as you can. However, taking the extra time and doing the extra legwork ensures you hire a true professional like the ones available at Billy.com. Remember, a bit of extra work now could save you a ton of money in the future.