Licensed, Bonded and Insured. Why Does It Matter?
Licensed, bonded and insured. It’s a common phrase for many businesses. Customers know it can be a good thing, but do they really know why they should care?
Your Buddy vs. A Professional
Let’s say you and your neighbor want to have some work done on your homes. You hire a buddy who likes to fix things in his spare time. He’s not licensed, bonded or insured. Even though it could be illegal in your state to hire an unlicensed contractor, your buddy’s price is so cheap that you can’t refuse.
Your neighbor hires an experienced contractor that is licensed, bonded and insured. He’s paying more to get the job done.
If both projects turn out perfectly, then you might be happy with your decision. But what happens if your buddy or your neighbor’s contractor walks off the job, does shabby work, gets injured or damages the home?
Being licensed means that the contractor has experience in his field. A contractor must prove he has insurance before a license will be issued. If there are issues, a customer can file a complaint against his license. Your neighbor’s contractor can prove that he has experience necessary to get the job done right, while your buddy probably can’t.
If a worker gets injured on the job or causes damage to the home, insurance comes in to play. Your neighbor’s contractor is insured, so the claim goes to his insurance. But your buddy isn’t insured, so he has to make a claim against your personal homeowner’s insurance. This could result in a lawsuit, increased insurance premiums or even cancellation of your homeowner’s insurance altogether.
If your buddy decides to take your money and walk off the job, you are out of luck. Your buddy isn’t bonded, so you have no guarantee and no legal recourse. What you do have is an unfinished project, bad workmanship or unpaid suppliers and workers. Who pays to correct the mistakes, pay the workers and find someone to finish the project? You do.
Your neighbor, however, is in a much better position. If there are issues with his project, he can make a claim on the contractor’s bond. The bonding company will do their due diligence to get all the facts. If they find that your neighbor’s contractor is at fault and didn’t honor the terms of the bond, the bonding company will find another contractor to finish the job properly. Your neighbor then gets to enjoy his home, while you are stuck in a lawsuit, dealing with your insurance company, paying suppliers and workers or scrambling to find another contractor.
Before Starting a Project ….
It just makes sense to look for companies that are licensed, bonded and insured. It may seem like an unnecessary expense at first, but you can pay dearly later on by hiring someone who doesn’t guarantee their work.
Ask to see the contractor’s license. Jot down the license number and make sure he is licensed in your state. Also get the names of the insurance company and bonding company, along with the bond number, before signing a contract.
Hopefully everything will work out fine and you won’t need to use this information. But if problems arise, you want to be prepared.
Other Bonded Businesses
Contractors aren’t the only ones that can be licensed, bonded and insured. Below is a sample of businesses that may obtain a Business Services Bond, which protects consumers against dishonest acts of the company’s employees. If you hire these businesses to work in your home or business, ask for their license, insurance and bond information.
|Janitorial Services||Security Guard||Interior Decorator|
|Pest Control||Carpet Cleaning||Locksmiths|
|Maid Service||Appliance Repair||Messenger Services|
|Home Photographer||Food Catering||Other Contractors|
|Pool Cleaning||Gutter Cleaning||Lawn Services|
|Health Care Provider||Painters||Pet Sitters|
If a business claims they are bonded, ask what the bond covers. It’s possible that the bond only guarantees they will pay their taxes to the state, and does not include any protection for their customers.
Be smart when it comes to hiring a business. A little fact-checking can save you many headaches in the long run.
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