The importance of this topic can’t be overstated. Working with a general contractor that isn’t properly licensed, bonded, and insured opens a homeowner to all kinds of unnecessary liability.
In Washington State and many other parts of the country, if you work with an unlicensed contractor, your insurance won’t cover any damages that might result from improperly executed work. Additionally, you may find yourself liable for the overage if a worker is injured on the job and your general contractor doesn’t carry adequate bodily injury liability or workers’ compensation coverage.
These rules exist for a good reason. Licensing requirements allow the state to police contractor quality. An unlicensed contractor operates outside of the system and is therefore working without oversight and is incompatible with permit requirements.
Checking on a general contractor’s credentials is easy, and it ensures you’re working with a reputable business. But before we discuss how, let’s define our terms.
What Does it Mean to Say a General Contractor is Licensed, Bonded, and Insured?
Let’s take these one at a time.
To receive a Washington contractor license, applicants need to register their business with the state, obtain a $12,000 surety bond, and submit a certificate showing they have at least $50,000 of property damage coverage and $200,000 of public liability coverage. Then they need to complete and submit the application form.
Licensing allows regulators to guarantee that basic safety and insurance requirements are met. The process also helps screen out dishonest contractors by creating a paper trail that follows their business. The state can’t protect you if you hire an unlicensed contractor, which is why it’s something you should avoid.
Insurance companies issue surety bonds, but bonds operate differently from insurance. Whereas insurance is intended to cover losses in the case of unforeseen circumstances, a surety bond exists to ensure that a contractor upholds their contractual obligations and to make sure the job is completed. To that end, it protects both the general contractor and the customer.
Let’s imagine that, in the middle of a major renovation, the contractor experiences a severe cashflow issue that prevents them from purchasing needed materials. The surety can make up the shortfall. Or, if the contractor abandons the project, the surety can step in to find a replacement.
An adequately insured general contractor will carry two insurance types — general liability and workers’ compensation insurance. There are other types of policies a general contractor can purchase, but these two are the most important.
Liability insurance protects the property owner against damage and injuries caused by accidents and contractor negligence. Workers’ compensation covers medical and rehabilitation costs and disability income for workers that are injured on the job.
Checking General Contractor Licensing and Insurance Status
The Washington State Department of Labor & Industries provides a convenient online tool to help property owners confirm that a contractor is actively licensed and fulfills insurance and bond requirements.
Simply navigate to https://secure.lni.wa.gov/verify/ and search for the general contractor you’re considering hiring. You’ll find information on their license status, their bond amount, and the dollar amounts of both liability and workers’ comp insurance they’re currently carrying.
As a bonus, the site also lists any lawsuits against the contractor’s bond and any license violations or citations they’ve received. It also lets you confirm other business details like the business owner and contact information.
This is a critical step that shouldn’t be skipped. If someone is injured on your property or damage occurs during a construction project, you could be on the hook if the contractor you hire isn’t properly licensed or insured.
If you’d like more information on this topic, feel free to give us a call. We can talk about credentials in general and our own ample protections. And if you’d like an estimate on an upcoming project, we’d be happy to discuss the particulars with you. Remote consultations are available.