The Value Of Being A Licensed, Bonded & Insured Contractor

Insured Contractor

Do you need more customers? Are you looking to grow your business? Do you ever wonder why you aren’t winning more jobs? These are all important questions that need to be addressed if you’re going to run a successful business.

Working as a contractor and running your own business are no easy tasks. It takes hard work, long hours and extreme dedication. If there’s one area of your business you should be paying attention to, it’s your qualifications and licensing requirements. See the value of being a licensed, bonded and insured contractor and why all practicing service professionals should take this matter seriously if you want to grow your business.


Is it Necessary?

You’re probably wondering, is all of this really necessary? You may be doing fine how things are and not too concerned over what you do or don’t have hanging on your office wall, however, your customers care. From plumbers to interior designers, most service-based occupations require a license, but the laws and regulations differ by state, so be sure to do your homework. Given the advances in technology and our increased access to information over the Internet, there’s really no reason to be practicing without the proper license.

What Does it all mean?

To qualify to become a licensed contractor, you need the experience and skill set required to run and manage a construction business. This means you need field supervision knowledge and experience under your belt, such as supervision of the work, scheduling of the subcontractors and compliance with the building codes.

You should also know that contractors can’t get licensed without passing an examination related to business management competency. Other requirements include a criminal background check and not possessing any outstanding open contracting grievances. A licensed contractor has worker’s compensation and liability insurance for his or her employees and is allowed to get and sign building permits.


Your state may require licensed professional contractors to be bonded as well, which means you guarantee your services to your customers. You have a contract with a bank or insurance company maintaining what’s essentially a pre-paid savings account. This money exists in case the project you’re working on turns out incomplete, according to the contract between you and your customer. Take note that there are many types of bonds available, so you’ll want to confirm you have the right bond type(s) for your business.

In addition, it’s vital that your business is properly insured. There are different insurance policies and requirements for a roofing contractor versus a interior designer, so make sure you know what’s necessary for you. Your insurance needs to cover you and your employees since you carry the risk of job site injuries. Many homeowners are starting to ask and pay attention to the type of insurance their potential contractors have, so be prepared to present a copy of your certificate of insurance if requested.

Customer Service

Why do Homeowners Care?

A homeowner is taking a big risk allowing a stranger in their home and making updates to their personal space. Your job is to ease their concerns and hesitations by providing the necessary documents and paperwork upfront. You want to make them feel secure and comfortable having you in their home to complete the project. Trying to be sneaky or hide the truth about you or your business is only going to get you in hot water down the road.

More Business

What’s in it for me?

Of course, you’re going to wonder what securing these credentials is going to do for you and your business. The short answer is that it’s only going to help you. Having a license will give you a competitive edge in the marketplace and help you win more home improvement and renovation projects. Consumers like working with contractors who have the proper licensing because it means they’re protected by the statutes that exist to safeguard them against any issues that may arise.

What are my Next Steps?

Before you make a decision about how you’re going to move forward, you should review what it’s going to take to become a licensed, bonded and insured contractor. Start by finding out the requirements for your trade in your state. The entire process usually requires at least several months of stringent evaluation, screening and business and trade exams.

Typically, the first step involves filling out an application, but once again, check with your state. Once the state approves the submitted forms, you’ll receive a notice letting you know when you’ll sit to take the state assessment. You should be prepared to answer questions related to law, business and state codes.

Assuming you pass the exam, you must spend the money for compulsory license fees, post a bond, secure workman’s compensation and liability insurance if needed, as well as prove minimal working capital. Like most licenses and certificates, yours will expire in roughly two to four years (depending on your state) and will need to be renewed, if you wish to continue operating as a licensed contractor.


By now you should have the proper information and details to help you make an informed decision about securing or renewing your license and insurance. There are many reasons why you should become a licensed contractor, but the final decision is yours. No matter what you choose, at least make sure you’re honest with your customers about what you do or don’t have hanging on your office wall.