Verify Contractor Licensing and Insurance
Before signing any contract, you must verify your contractor's license is active and their insurance coverage is adequate. This 30-minute check can save you from devastating liability and ensure you're working with a legitimate professional.
Quick Summary
Time needed
30-60 minutes
General liability minimum
$1 million
Workers comp
Required in most states
Why This Step Matters
An unlicensed or underinsured contractor puts your entire project—and personal assets—at risk. If a worker is injured on your property and the contractor lacks workers' compensation insurance, you could be personally liable for medical bills and lost wages. Without proper licensing, your permits may be invalid and the work may need to be redone.
Real Financial Risk
If a worker falls off your roof and the contractor has no workers' comp, you could face lawsuits exceeding $100,000. Your homeowner's insurance may not cover construction accidents—verify this with your insurer.
How to Verify Licensing and Insurance
Look Up the Contractor's License
Every state has an online license lookup system. Search for your state's contractor licensing board website and enter the contractor's license number or business name. Verify:
- License status is "Active" or "Current"
- License type covers general contracting/home building
- Business name matches who you're hiring
- No disciplinary actions or complaints on file
Screenshot everything. Print or save the license verification page for your records. License status can change, and you want proof of what you verified.
Request a Certificate of Insurance
Ask the contractor for a Certificate of Insurance (COI) directly from their insurance company—not a photocopy they provide. A legitimate COI should show:
- General Liability: Minimum $1,000,000 per occurrence
- Workers' Compensation: State-required limits
- Policy effective dates that cover your entire project
- Your name and address as "Certificate Holder"
Pro tip: Ask to be added as an "Additional Insured" on their policy. This gives you direct coverage under their insurance for this project.
Verify Insurance is Active
Don't just accept a COI at face value—call the insurance company to confirm the policy is active. Insurance can be cancelled at any time, and contractors sometimes provide expired certificates.
Important: Request that the insurance company notify you if the policy is cancelled or lapses during your project. This is a standard request and should be included on your COI.
Confirm Workers' Compensation Coverage
Workers' comp is separate from general liability. In most states, any contractor with employees must carry workers' comp insurance. If a contractor claims they don't need it because they have "no employees," verify:
- • Are they truly a solo operator (unlikely for an addition)?
- • Do their subcontractors carry their own workers' comp?
- • What happens if they hire helpers for your job?
When in doubt, require it. Even solo contractors should carry workers' comp—if they get injured, their personal injury lawyer may come after your homeowner's insurance.
Check Subcontractor Coverage
Your general contractor will hire subcontractors (electricians, plumbers, etc.). Ask how subcontractor insurance is handled:
- • Does the GC require subs to carry their own insurance?
- • Does the GC's policy cover subcontractor work?
- • Will you receive COIs from major subcontractors?
Best practice: Include a contract clause requiring all subcontractors to be licensed and insured, with the GC responsible for verification.
Minimum Insurance Requirements
These are recommended minimums for a home addition project.
| Insurance Type | Minimum Coverage | Purpose |
|---|---|---|
| General Liability | $1,000,000 per occurrence | Property damage, third-party injuries |
| Aggregate Liability | $2,000,000 | Total coverage limit per year |
| Workers' Compensation | State statutory limits | Worker injuries on your property |
| Auto Liability | $500,000 | Work vehicles, deliveries |
For projects over $250,000, consider requiring $2M in general liability coverage.
What to Look for in License Lookup
Good Signs
- • License status: Active/Current
- • License type: General Contractor (B license)
- • In business 5+ years
- • No complaints or disciplinary actions
- • Bond on file (if required)
Warning Signs
- • License expired or inactive
- • Wrong license type for additions
- • History of complaints or citations
- • License suspended or revoked
- • Bond lapsed or insufficient
Frequently Asked Questions
What if my contractor's insurance expires during the project?
Stop work immediately and require proof of renewed coverage before continuing. Include a contract clause requiring the contractor to maintain insurance throughout the project and notify you of any changes. Never continue work with an uninsured contractor.
Is my homeowner's insurance enough protection?
Probably not. Most homeowner's policies exclude construction activities and contractor negligence. Call your insurance agent before construction starts to understand your coverage gaps. You may need a builder's risk policy for the addition itself.
The contractor says they're a sole proprietor with no employees. Do they need workers' comp?
This is a gray area that varies by state. However, for an addition, they'll almost certainly hire helpers or subcontractors. Either require workers' comp anyway, or get a written guarantee that all helpers/subs carry their own coverage with COIs provided to you.
What if the contractor has complaints on file with the licensing board?
Read the complaints carefully. One minor complaint in 20 years isn't concerning; multiple complaints about abandoned projects or fraud is a dealbreaker. Ask the contractor about any complaints directly and judge their response. Legitimate contractors can explain resolved issues honestly.
Ready for the Next Step?
With a verified, licensed, and insured contractor selected, you're ready to apply for your building permit. This is one of the most important milestones in your project timeline.