Why Should Contractors Be Licensed, Insured and Bonded?

Many industries require certification for workers or subcontractors, and the construction industry is no exception.  The essential items to look for when hiring a contractor for any major construction project include licensing, bonding, and adequate insurance.  


The most common qualification is being fully insured. Having an insured contractor means that the contractor has adequate insurance protecting them, their workers, the equipment, and even the work product in case of an emergency or disaster. This guarantees that if something goes wrong, the contractor will have the funds to cover worker health costs and to repair any damages, lost materials, or lost work.  

Licensing and bonding should also be required for any contractors you are hiring. Licensing is a permit issued by the state to undertake a particular type of work, certifying that the company has met the requirements needed to operate as a contractor. Each state will have their unique requirements for licensure and each type of contractor will have a different type of license. For someone who works in multiple areas, there are general contractor licenses that will cover multiple requirements.   

Bonding means the contractor has purchased a surety bond. This bond is insurance for the owner of the property. The bond provides liability protection.  If the contractor fails to complete a job as required or contracted, the bond will provide compensation to the property owner. As examples, if a contractor leaves a job incomplete, fails to complete the work on time, or otherwise damages the project or property, then the owner will receive restitution.  


A licensed, bonded and insured contractor is a contractor that is following the law. Because licensing is required to be a contractor, an unlicensed contractor is breaking the law.  They are more likely to provide less than acceptable work, and may possibly fail to hit code.  Moreover, the owner or project manager runs the risk of giving up their right to make warranty claims due to their use of unlicensed labor. Many states will provide assistance if a project is completed with shoddy workmanship, but because an unlicensed contractor does not meet the state’s requirements for work, the state may assume the owner or project manager knew this and can use it as a basis to deny assistance. 

Additionally, an uninsured contractor may leave a property owner or project manager open to liability. A licensed contractor is usually required to have worker’s compensation insurance, but someone who is unlicensed may have no insurance at all. This means that if one of their workers, or another contractor, is hurt during the project, the property owner may be expected to cover the additional costs.

Taking the time to find and hire a licensed, insured, and bonded contractor can not only ensure that your project is completed on time and to code, but it may also prevent legal or financial penalties should anything go wrong. As a licensed, insured, and bonded contractor, UBS works hard to ensure that your project is completed to the highest quality. Contact us at 303 – 466 – 7200 to learn more.