Verify Licenses and Insurance
Hiring an unlicensed or uninsured contractor is one of the costliest mistakes a homeowner can make. If a worker is injured on your property and the contractor lacks workers compensation insurance, you could be personally liable. If work is done without proper licensing, your permits could be voided and you might have to tear out and redo everything. Verification takes an hour and protects you completely.
Time Required
1-2 hours
Cost
$0 (free public records)
Difficulty
Easy (online verification)
State Licensing Board Verification
Look up the contractor license online
Every state that requires contractor licensing has a public database where you can verify license status. Search for your state's contractor licensing board website and enter the contractor's name or license number. Confirm the license is active (not expired, suspended, or revoked), covers the type of work you need (general remodeling, not just painting), and is held by the actual person or company you are hiring.
Check for complaints and disciplinary actions
Most state licensing boards list complaints, disciplinary actions, and license suspensions in their public records. A contractor with a clean record after 15 years of business is a much safer bet than one with multiple complaints, even if they have been resolved. Pay attention to patterns: repeated complaints about the same issue signal a fundamental problem with how they do business.
Verify subcontractor licenses
Your general contractor will bring in licensed subcontractors for electrical, plumbing, and HVAC work. Ask for the names and license numbers of all subcontractors and verify each one independently. In most states, the specific trade work (electrical, plumbing, HVAC) requires a separate specialty license. An electrician should hold a journeyman or master electrician license, not just a general contractor license.
Understand your state's requirements
Licensing requirements vary significantly by state. Some states license general contractors at the state level, others at the county or city level, and a few have minimal requirements. States like California, Florida, and Arizona have rigorous licensing with exams, bonding, and continuing education. Research what your state requires and hold your contractor to that standard.
Insurance Certificates You Must See
- General liability insurance: This covers damage to your property caused by the contractor or their crew. Minimum coverage should be $1 million per occurrence and $2 million aggregate. If a worker accidentally cracks your foundation or sets off a sprinkler and floods your house, general liability pays for the damage. Without it, you would have to sue the contractor personally.
- Workers compensation insurance: This covers medical expenses and lost wages if a worker is injured on your property. Without workers comp, an injured worker could sue you as the property owner. Most states require contractors with employees to carry workers comp. Even if your contractor is a sole proprietor, verify that all subcontractors carry their own workers comp policies.
- Auto insurance for commercial vehicles: If the contractor drives work vehicles to your property, their personal auto insurance may not cover accidents during business use. Commercial auto insurance protects against liability if a work truck damages your property or causes an accident while traveling to your job site.
- Umbrella or excess liability: For projects over $50,000, ask if the contractor carries umbrella liability coverage that extends beyond their base general liability limits. This provides additional protection for catastrophic incidents. Not all contractors carry this, but it is a sign of a well-established, responsible business.
How to Verify Insurance is Current
- Request a Certificate of Insurance (COI): Ask the contractor for a current COI from their insurance company, not a photocopy of their policy. The COI should list your name and address as the certificate holder. This document confirms the policy is active, lists coverage amounts, and provides the insurance company's contact information for direct verification.
- Call the insurance company directly: Do not just accept the certificate at face value. Call the phone number on the COI and verify that the policy is active and covers the type of work being performed. Some contractors let their insurance lapse between projects or carry policies that exclude certain types of work.
- Request to be added as an additional insured: Ask the contractor to add you as an "additional insured" on their general liability policy for the duration of the project. This gives you direct protection under their policy and means the insurance company will notify you if the policy is canceled or modified during your project.
- Verify coverage dates span your project: Ensure the policy expiration dates extend beyond your projected completion date. If a policy expires mid-project, get written confirmation that it will be renewed. Demand updated certificates when policies are renewed during your project.
Pro Tips
- •Never accept "I am bonded" as a substitute for insurance: A contractor bond and insurance are different things. A bond guarantees the contractor will complete the work; insurance protects you from liability. You need both. Bonds also have limits (often $10,000-$25,000) that may not cover the full cost of your project if something goes wrong.
- •Check your own homeowner's insurance: Notify your homeowner's insurance company about the remodel before work begins. Some policies exclude or limit coverage during major renovations. You may need a builder's risk endorsement or a separate builder's risk policy for the duration of construction. This typically costs $500-$2,000 for a $50,000+ project.
- •Create a verification file: Keep copies of the contractor's license, COI, workers comp certificate, bond, and subcontractor documentation in a single folder. If any issue arises during the project, you have immediate access to all protective documentation. Share digital copies with your attorney if you have one reviewing the contract.