Hiring a contractor can sometimes feel like you’re playing a game of chance. There’s a strong possibility that everything will go smoothly, but there’s always the possibility of making a mistake, as well. It definitely feels more secure when a friend or family member recommends someone who they’ve previously hired and vetted. It’s even better when they give a glowing review of the contractor’s work. But, sometimes it’s not quite that easy. So, what if you’re hiring someone that you found online or through a local ad? What questions should you ask? What is truly important in choosing a reputable contractor?
I would estimate that over 90% of our potential clients ask if we are licensed and insured from the very beginning. That’s definitely a great first question to ask and I’m always happy to tell them that we are. However, I’m surprised that very few people have asked if we are bonded. While we are bonded, as well, the lack of this question made me begin to wonder if people really understand what these terms actually mean. So, what does it mean for a contractor to be licensed, bonded and insured?
I’m not going to attempt to explain licensing in every jurisdiction, so check your local requirements because they vary by city and state. But, for the sake of this example, I will focus on the local requirements. In San Antonio, contractors are no longer required to be “licensed”, but they are required to be “registered” with the City of San Antonio’s Development Services in order to obtain a contractor’s permit. With that being said, most folks around here still use the terms “licensed contractor” and “registered contractor” interchangeably, with the term “licensed” being the most common. So, what does it take for a contractor to become registered in San Antonio? Very little, actually. This comes as a real surprise to many people.
To become a “Registered Contractor” the applicant has to fill out the appropriate application and submit it in person, along with a government issued photo ID. The applicant must also pass a Criminal Background Check. And that’s literally all it takes. It’s actually rather scary that almost anyone can become a registered/ licensed contractor as long as they don’t have a criminal history. So, it’s definitely not enough to simply ask if your prospective contractor is registered and stop there. It’s quite possible that he or she actually has very little “real life” experience. There’s not a “written contractor’s exam” or a minimum amount of work experience required, as many people believe. So, it’s imperative to also ask your prospective contractor what kind of experience that he or she has. What kinds of projects that he or she has completed? What’s the largest project that they’ve completed? How many years of experience do they have? Ask them to explain, in detail, how they will complete your project. For example, if the contractor is repairing a shower leak, ask how they will prevent it from leaking again. What kinds of products will they use to complete the remodel? Why do they prefer this product over another product? An experienced contractor will have no problem answering these questions. Asking these key questions will quickly separate an inexperienced contractor from a knowledgeable one.
So, what’s the purpose of General Liability Insurance and why should you look for a contractor who’s insured? First, homeowner’s should understand that General Liability Insurance is in place to protect not only the homeowner, but also the contractor. If a homeowner alleges bodily harm, injury or property damage, the insurance is in place to cover these damages. Without it, a large claim could easily put a contractor out of business. General Liability also covers any court costs for the contractor and pays out any court judgments issued against the contractor. So, how does General Liability Insurance cover the homeowner? If a homeowner’s property is damaged due to the contractor, the liability insurance will cover the costs (within policy limits). For example, if the contractor is unloading supplies and accidentally backs his truck into the side of the homeowner’s house, the insurance will cover any necessary repairs. This is also true in the unfortunate event that a homeowner is hurt during the project, such as stepping on a nail, tripping over a ladder or something more serious. But, what if a contractor fails to complete his work or runs off with a large sum of the homeowner’s money? General Liability Insurance does NOT generally cover these circumstances. Filing a lawsuit is about the only recourse that a homeowner has in these bleak circumstances, but there’s a fairly simple way for homeowners to protect themselves from this ever happening; they should insist on hiring a contractor who is not only insured, but bonded, as well.
Most folks don’t think to ask a contractor if he is bonded, but it’s actually one of the MOST important questions that you should ask. Why is it important for a contractor to be bonded by a surety company? Because the bond is in place for the sole purpose of protecting the homeowner. A contractor’s bond protects the homeowner if the contractor doesn’t complete the work, fails to pay for necessary permits, fails to pay subcontractors, or fails to pay vendors for materials used in the project. It also gives the homeowner recourse if the work that’s completed is sub-par. In the event of any of these unfortunate circumstances, the homeowner can file a claim with the surety company that issued the bond to the contractor. In layman’s terms, a contractor’s bond is an insurance policy for the homeowner. It’s a pretty fair bet that if a contractor actually pays for a bond to ensure that his clients are covered, he’s interested in providing his clients with peace of mind and is looking out for their best interest.
When searching for a contractor, look for someone who is licensed/ registered, insured and bonded. Research the requirements that your city has in place to issue a contractor’s license and don’t forget to ask lots of questions, too. Ask for copies of your contractor’s liability insurance and surety bond; don’t just take their word for it. Finally, make sure that their policy limits are sufficient to cover your project. Arming yourself with knowledge of the process and a clear understanding of the terminology can provide you with the confidence to make a great informed decision.