When shopping around for estimates for work on your property, one thing you see a lot is when a contractor is licensed, bonded and insured. But what does that mean, and is it really that important? What might happen if you hire someone who isn’t?
In Oregon, contractors must be licensed by the Construction Contractors Board. You can (and should!) check the licensing status of any contractor you invite into your home. Licensing shows that the contractor has met certain industry standards and is allowed to work in your area. Hiring an unlicensed contractor could cost you big. If the work does not meet local codes, you will be responsible for paying for the repairs to meet code. An unlicensed contractor cannot pull any necessary permits which could also cost you time and money to rectify. Allowing work to be done by an unlicensed contractor could also void your homeowner’s insurance policy, should a claim arise as a result of that work.
When a contractor is bonded, it means there is a guarantee that the contractor will do the work he or she is supposed to. It is secured money that would be distributed to the homeowner in the event the contractor failed to perform. One example is if a plumbing contractor failed to make a pipe repair properly and caused a leak that damaged your home. The bond would also cover the loss if a company employee stole something from your home. Ask for documentation that your contractor is bonded and be sure you understand exactly what it covers.
We all expect that nothing will go wrong when someone is working on our homes, but occasionally accidents do happen. Contractors should carry two types of insurance: liability and worker’s compensation.
- Liability insurance will protect you in the event a contractor accidentally damages your home. Your personal homeowner’s insurance may not cover the damage done when, say, an improperly installed chandelier falls to the floor. It is worth it to have peace of mind that your home will be protected in the case of an accident.
- Worker’s compensation insurance will cover a claim an employee makes if they are injured while working on your home. Your homeowner’s insurance might help cover the cost to pay the claim, but that could result in an increase in your rates. This policy comes at a significant cost to the contractor, so if you’re shopping for the lowest estimate possible, you might end up with a contractor who does not offer this insurance.
It may be tempting to hire a contractor based solely on price in order to save money up front, but it is never worth the risk to your home or bank account should anything go wrong. Licensed, bonded and insured contractors usually charge more than those who haven’t earned the credentials or paid for the insurance protection because meeting those standards and paying those deductibles costs them money. Hire the best contractor you can, who comes highly rated by people you respect, and enjoy peace of mind that you are protected.