GUIDE
Licensed, Bonded and Insured: What It Means and How to Check a Contractor
Updated
When a contractor says they’re licensed, bonded and insured, that’s three separate claims. Each takes a few minutes to check, so check them.
What each word means
| Term | What it means | Who it protects |
|---|---|---|
| Licensed | Registered or approved by your state or local authority to do that kind of work | You, through rules and a complaint process |
| Bonded | A surety bond exists that you may be able to claim against if the contractor breaks the rules | You, in some cases |
| Insured | Carries insurance, usually general liability and workers’ compensation | You and the crew |
Requirements differ by state. Some states have strict licensing for most trades, others leave it to cities or counties. The NASCLA site is a starting point for finding your state’s board.
How to verify a contractor
- License: Ask for the license number and look it up on your state licensing board’s website. Check the status is active, the name matches and the license class covers your job. Many boards also show complaints.
- Insurance: Ask for a certificate of insurance (COI). Check the policy dates and coverage types. Then call the agent listed on the certificate. A paper COI can be out of date.
- Workers’ comp: If a worker gets hurt on your property and the contractor has no workers’ compensation, you could face a claim. Ask for proof, not a promise.
- Bond: If your state requires a bond, the licensing board often lists it.
Why it matters to you
Without insurance, damage to your home or an injury on your property can become your problem and your homeowner’s policy. Without a license, you may have fewer options if the work is poor, and in some states you can’t enforce the contract. The Insurance Information Institute explains how liability and workers’ compensation coverage work in plain language.
Red flags
- The contractor won’t give a license number or certificate.
- They ask for most of the payment up front.
- The price is far below the others. Compare it with a cost estimate before you decide.
- No written estimate or contract.
A good contractor hands these over without fuss, and will give you a clear written estimate and put changes in writing as a change order.
Frequently asked questions
What does licensed, bonded and insured mean?
Licensed means the contractor is registered with your state or local authority. Bonded means a surety bond backs them up if they fail to meet certain obligations. Insured means they carry insurance, usually general liability and workers' compensation.
How do I check if a contractor is licensed?
Search your state contractor licensing board's website for the license number or business name. Confirm that it is active and covers the type of work you're hiring for.
How do I verify insurance?
Ask for a certificate of insurance and call the insurance agent listed on it to confirm the policy is active. Ask to be named as certificate holder.
Is bonded the same as insured?
No. Insurance protects against accidents and damage. A bond is a guarantee, usually tied to licensing, that gives you a route to claim if the contractor doesn't meet their legal obligations.
Do all contractors need a license?
It depends on the state and the size of the job. Some states have no statewide license for certain trades, or exempt small jobs. Look up your state's rules.