You should always hire a licensed and insured contractor because it protects you from liability, poor workmanship, and financial loss. An unlicensed contractor may be cheaper but leaves you exposed if something goes wrong, someone is injured, or the work fails inspection. Here’s why hiring a licensed, insured contractor matters.
(Updated October 2024)
Every construction project comes with some risk, whether it’s building a new home or renovating an old one. But hiring an uninsured contractor is a risk you should never take., especially if you’re expecting quality work. Here’s what to look for when searching licensed contractors near me.
At GreatBuildz, we help homeowners in California find reliable, licensed, and insured general contractors near me. We talk to homeowners every day about why hiring insured contractors is so important. Here’s what you need to know.
When a contractor takes on a building project, he or she is also taking on a lot of liability. Therefore contractors need insurance, to cover themselves and their employees in the event of an accident or incident on the job site. The issue of insurance is so critical that most states refuse to issue a contractor’s license to anyone who does not carry the required amount of insurance worker’s compensation and general liability insurance.
This is how to check if your own general contractor is insured in California:
- You can go to the CSLB website to determine if the contractor is bonded and insured with Workers’ Compensation insurance.
- But, to make sure you are working with a fully insured contractor, you will also need to get a copy of their General Liability policy. You can get proof of insurance from the contractor directly or their agent. Make sure the policy is up to date.
Why You Should Only Work with Licensed General Contractors Near Me
As the homeowner, it is in your best interest to only work with licensed, bonded, and insured home renovation contractors – regardless if your scope of work is a whole house remodel, bathroom or kitchen remodel, or any other kind of interior design project. Doing the opposite could result in financial repercussions if the building projects do not go as planned or someone is injured on the job. Keep this in mind when searching “home improvement contractors near me”.
Remember that a lot of things can go wrong on a construction site. And when you choose an unlicensed or uninsured contractor, you could end up bearing some financial liabilities for your construction project. If the workmanship like electrical work, plumbing, or flooring is subpar or causes damage to your property or if a crew person gets injured, you may have to pay for this out-of-pocket.
3 Insurance Policies Needed by Your General Contractor Near Me
Your local contractors need to protect themselves and their workers if something goes wrong on the job, regardless of the scope of work. Most states won’t give a contractor’s license to someone without the right insurance. Here are the main types a contractor should have:
You should look for the following when evaluating home improvement contractors near me:
1. Workers Compensation Insurance
This insurance covers medical bills if a worker gets hurt on the job. Without it, you might have to pay these costs.
Workers’ compensation insurance is a must-have for any California contractor. You could be stuck paying the medical bills of an injured employee if you hire a contractor without workers’ compensation insurance to renovate your property.
On the job site, contractors and their workers are at risk of getting injured while working on your project. And while you may think that an injured worker is not your responsibility, that is not always the case. For those contractors without workers’ compensation insurance, the claim may go to the prime contractor, which in most states is the project owner.
The medical bills and lost wages that they accrue while they are unable to work could fall on you, and your homeowners’ insurance may not protect you from this financial burden.
2. General Liability Insurance
This covers damage to your property. For example, if a contractor accidentally breaks your neighbor’s fence, their insurance should pay for the repair.
Before hiring, check to see if he or she is properly insured against general liability. Aside from physical injury, accidental property damage is also common on the construction site. When this happens, the affected party may seek compensation for the losses from the Contractor’s General Liability Insurance policy.
Say, for example, one of the crew accidentally hits your neighbor’s fence during the process of your home renovation. If the local general contractor in Los Angeles carries general liability insurance, the claim could be made against their policy. But if they don’t have any, you could be held responsible for the damage if the contractor refuses to make the repair.
In addition to general liability, make sure your contractor’s insurance policy also covers products and completed operations. This shields you from lawsuits resulting from the harm contractors inflict on third parties and allows you to collect if their work turns out to be subpar and causes you harm in the future.
3. Auto Liability Insurance
Homeowners and businesses often overlook auto liability insurance when hiring contractors for renovation or construction, but this is important if your project requires a support fleet of trucks and other vehicles.
If your project involves a lot of transportation, make sure the contractor has auto liability insurance. This covers accidents that happen when loading or unloading materials.
This policy may not be necessary for small-scale projects with little transportation involved. To determine if you should require auto liability coverage from your contractor, review your specific project requirements or speak to your insurance agent.
Before hiring any contractor, ask for their proof of insurance coverage first. For added measure, you may want to contact the agency yourself to confirm that the coverage is up-to-date, valid, and will remain so for the duration of your building projects.
The Risks of Hiring an Uninsured Contractor
Contractors insurance is the buffer that will safeguard your personal and financial interests, should the unthinkable happen. Whether you are renovating your living room, kitchen remodeling, or any other home improvement project, you need to be insured. These reasons should be enough to convince you not to work with uninsured contractors:
1. Financial Risk
When working with uninsured contractors, you run the risk of financial responsibility if an accident occurs, or if your property is damaged. While hiring an uninsured contractor may allow you to save money in the short term, the long-term risk they expose you to may hurt your finances badly. You’re better off hiring a good licensed general contractor near me who can manage subcontractors for your project.
2. Property Damage
Uninsured contractors may not be able to pay you back for any damage to your property. That means you will be on the hook for the full cost of repairs. If you’re renovating for business on a leased property, you may be required to use a licensed, bonded, and insured general contracting company to execute the work.
Any damage to the property during the remodeling project because of your contractor’s negligence could end up becoming your liability.
3. Insurance Gaps in Coverage
Your home insurance might not cover accidents caused by an uninsured contractor.
If you’re under the impression that your uninsured contractor-related losses will be covered by your home insurance or property insurance policy, it may not. If a crew is injured on your property during the remodel project and requires a lengthy hospital stay, different scenarios will ensue, depending on your specific homeowners’ insurance policy.
If the contractor is licensed, bonded, and insured, then their workers’ compensation policy will apply. If not, the liability may fall on you or you will have to pay for the medical bills and compensate for lost wages out of pocket.
Before you even start researching a home renovation project, you should review your homeowners’ insurance policy carefully. If reading all the fine print and legal jargon in your policy paperwork is too daunting, just call your agent and ask what your policy covers. Either way, if you hire home contractors near me for your type of project who has a valid license and active policy, you can legally protect yourself and your home.
4. Legal Issues
You essentially become the general contractor in the eyes of the law if you hire an uninsured contractor – unless you have experience with general contracting, you may be overwhelmed. So even if you’re tempted to hire an unlicensed contractor to save time or money, just don’t do it.
Working with a licensed, bonded, and insured California general contractor near me who can provide proof of insurance ensures that you will not be financially harmed if something goes wrong during the construction process. Hire a fully insured contractor who has all of their bases covered in terms of coverage and quality workmanship, minimizing your total project cost. In the long run, you will save time, money, and stress.
Frequently Asked Questions
Why should I hire a licensed contractor?
A licensed contractor has met the state’s requirements for competency, is accountable to the licensing board, and can legally pull permits. Hiring licensed protects your safety, your home’s value, and your legal recourse if something goes wrong. In California, unlicensed contractors can only legally handle jobs under $500.
Why does a contractor need insurance?
Insurance protects you if a worker is injured on your property or your home is damaged during the project. Without it, you could be held financially responsible. Always confirm a contractor carries liability insurance and workers’ compensation, and ask to be added as additional insured for larger jobs.
How do I check if a contractor is licensed and insured?
Use the California Contractors State License Board (CSLB) license lookup to verify the license is active and in good standing, and ask the contractor for current proof of liability insurance and workers’ compensation. Confirm both before signing a contract or paying a deposit.
When it comes time to hire a general contractor, you shouldn’t have to go it alone – GreatBuildz can help simplify your contractor search. GreatBuildz is a free service that connects homeowners in Los Angeles, Orange County, Ventura & San Diego with reliable, thoroughly screened general contractors and provides project support from start to finish.
Call now (818.317.3567) to chat with our local team about your next renovation project or visit our website for more information: www.greatbuildz.com
