The Difference Between Insured and Bonded Contractors
When hiring a contractor there is a big difference between contractors that are insured, a contractor that is bonded or one that is both insured and bonded. Exactly what are those differences and how do they affect you as a homeowner?
When a contractor is bonded and insured it offers an incentive for homeowners to hire them over a contractor that is not. Reputable home improvement specialists purchase bonds and insurance to protect consumers they work for while offering recourse in case something should go wrong.
A contractor’s bond offers protection to consumers against contractors failure to complete the job as the contract states, doesn’t pay for the proper permits or other financial obligations and such. In order for a contractor to become bonded they must pay a premium to a surety bonding company. Once the premium is paid by the contractor they are given a bond number and certification that confirms the surety company has agreed to provide protection to the consumer against several different issues that can arise from contractor error.
If you as a consumer feel that the work completed by the contractor is subpar or if materials and subcontractors aren’t paid they can contact the surety company direct to submit a claim. The state and municipality where you reside will determine the bonding requirements contractors must meet to ensure they have the proper contractor bond. Be sure to research these requirements before you hire a contractor to do work within your home or business.
A contractor that states they are licensed to perform work is different than those that are bonded. Two types of insurance commonly associated with contractors in the construction industry: liability insurance and workers compensation.
Liability insurance protects against property damage that occurs because of work that is performed by the contractor. It does not however cover issues related to poor quality workmanship. Those issues are covered under a contractor’s bond. This is why hiring a contractor that is both insured and bonded is important to protecting you as a consumer.
Workers compensation insurance is purchased by contractors to project against workers lost wages and medical services when they are hurt on the job. The families of the worker are also compensation benefits through workers comp insurance in the event of a death that occurs while at work. This is important insurance to look for as a homeowner when hiring a contractor to avoid being financially responsible for injuries that occur on your property while contracted work is being done.
To protect against any wrong doing on the part of the contractor be it intentional or unintentional it is important for homeowners to require contractors working for them to be both insured and bonded.