Basics That Every Property Owner Should Know about Contractors
What is Insurance and Licensing for Contractors all about?
There are 2 types of insurance that each Homeowner should understand before having a contractor come to your home to work on a project: General Liability Insurance and Worker's Compensation Insurance.
General LibilityInsurance is a must. If you have anyone do work on your home regardless of the nature of the work or size of the project, they must have general liability insurance. This goes for one-person operations as well as large contractors with many employees. General Liability Insurance covers you against legal claims that may occur as a result of someone being injured on your property. If someone wants to do work on your home and has no general liability insurance, you expose yourself to significant liability that could even result in you losing your home.
Worker's Compensation Insurance is separate from General Liability Insurance. The Law says that all Contractors, regardless of their trade, are required to carry adequate Worker's Compensation Insurance if they have even 1 employee. Therefore most one-person operations are exempt and do not have to carry Worker's Compensation Insurance, unless they are actually registered as an employee for their company. But all other contractors are required to carry this insurance.
Always ask to look at General Liability Insurance Policy and ask for Worker's Compensation Policy if the company has ANY employees.
Licensing is a tricky topic for most homeowners because they may not be familiar with the different licenses required for different types of work. There are 2 license types that we highlight below to help you better understand how to protect yourself and your home
Contractors' Business License (license must be held in the state which work is being done)
Always use contractors who have a current and valid Contractors' Business License. Reputable contractors should have no problem giving you their license # so that you may verify their good standing. There are an endless list of reason why you should NOT use un-licensed contractors, one of which is that if they destroy your home in the process of working on a project, you have no legal recourse.
Understand that a Trade License is not the same thing as a Contractor's Business License. While basic repair and installation work on electric, plumbing etc., does not require a Trade License, for your own safety the County does require Trade Licensing on larger projects like Electric and Plumbing system upgrades. This involves pulling Permits before work is begun and County inspection after work is completed. If a contractor says they cannot pull a permit, this should send a red flag. REMEMBER: When a contractor says they are licensed, they may in fact hold a valid Contractor's Business License, but that does not necessarily mean they are licensed to perform trade work (electric, plumbing, etc.). Ask to see a current and valid Trade License.
Finally, be certain to verify the status of any Sub-Contractors that your General Contractor uses on your home project.