When it comes to home improvements, costs add up quickly. It’s natural for even those with large renovation budgets to get enticed by the lowest bid, and for homeowners with modest spending capabilities, the bottom line may be the make-or-break deciding factor as to whether to hire a licensed contractor for home improvements. Unlicensed contractors, meanwhile, are often those whose bids are the lowest, which makes them appealing to homeowners across the board.
However, there are a multitude of risks associated with hiring an unlicensed contractor, many of which are costly. Damage to your property, unfinished work, and improper permitting all mean more money from you down the line. Here, we outline the dangers involved when you hire a contractor without proper credentials – and how to choose the right licensed contractor for your next home improvement project.
Why Are Unlicensed Contractors Less Expensive?
Unlicensed contractors typically provide lower quotes because they do not pay fees associated with official licensing or bonding, and more often than not, do not purchase liability or worker’s compensation insurance. An unlicensed contractor then, working with smaller operating costs, can offer services at a lower price tag than a licensed contractor for home improvements.
So, if two contractors are proposing the same quality of work within the same time frame, why not choose the one that is markedly cheaper? Simply put, the money you save up front could actually cost you lots more (tens of thousands more, in some cases) farther down the line.
What’s the Difference Between Licensed, Insured, and Bonded?
When you hire a home improvement contractor for a project, you’ll want to be sure he or she is insured, bonded and licensed where applicable. To better understand the importance of these, it’s important to be familiar with what each designation means.
A contractor’s license offers proof both that he or she has met specific training standards for the industry, and that he or she is permitted to work in the area. It is an official stamp of approval that the contractor has met, and continues to meet, competency requirements for his or her field.
But licensing goes beyond simple competency. It is assurance that work on your home is in accordance both with local ordinances and your homeowner’s insurance policy. Say, for example, you’ve hired an unlicensed general contractor to build a new deck for your backyard. The project runs according to plan, and the finished deck is beautiful – but when you go to sell your home, you find that your contractor did not build the deck to code. To sell the house, you need to redo the railing post attachments and ledger supports, at a substantial additional cost to you. The contractor you hired to do the project is in no way liable for the faulty plans.
Another important aspect of licensing is that is ensures the contractor will participate in arbitration hearings, should any disputes arise. And in the event that a third party is damaged or harmed (like your neighbor’s house or a passerby), a negligent unlicensed contractor means you, the homeowner, could be held legally responsible for repayment. When you hire a licensed contractor for home improvements, you can rest assured that he or she will be held accountable, in case any unforeseen problems happen.
There are two types of insurance your contractor should have: liability and worker’s compensation. Both serve to protect homeowners from significant financial responsibilities.
Liability insurance provides protection should anything happen to your house as a result of the contractor’s work. Suppose you’ve hired an uninsured contractor to retile your upstairs bathroom, and an overeager hand and errant nail bust open a water pipe. Water damages your bathroom walls, floor, and seeps down to the first floor where it ruins the carpeting. Sheetrock, insulation, and flooring all need to be replaced, but without liability insurance, your contractor can’t cover the cost of repairs. Standard homeowners insurance policies won’t cover it either, so it’s an out-of-pocket cost to you.
Worker’s compensation insurance covers employees of the contractor. Should the worker in the bathroom scenario above seek to claim compensation, you could be held liable. Homeowner’s insurance policies do often help cover the cost (after the deductible is met, of course), but you’ll still be paying down the line with an increase in your own insurance rates.
Essentially, if something major happened to a person and/or property during uninsured contract work, you are the one held responsible to cover the costs.
A bond guarantees that your contractor will perform the project according to your agreement. The bond serves as secured money to the homeowner, should the contractor not provide the work as purposed. Bonds also cover loss to homeowners, should any of your contractor’s employees take personal items from the property.
Before hiring a contractor, speak with him or her to ensure proof of bond, and to understand what it exactly does (and doesn’t) cover.
Ask for Proof!
Don’t assume that a contractor is necessarily licensed, insured, and bonded. Ask any contractor you are considering hiring to provide proof, and if necessary, check his or her listing with your local licensing authority. Search listings to ensure your home improvement contractor is licensed.
Be sure to get quotes from multiple contractors, so you can compare a variety of estimates. Where applicable, request a line item budget. Here, materials and labor are broken out, often by sub-projects. This will not only help you compare contractors’ estimates side by side, but also have a better understanding as to where you could cut or enhance spending.
Another important aspect in choosing the right professional for your project is researching customer reviews. Real feedback and stories from previous clients is a great resource. A positive review can make all the difference between two competitive contractors (while a negative review can be just as effective).
While a fully bonded, insured, and licensed contractor for home improvements may be pricier upfront, choosing one has tremendous value. Luckily, it’s easy to find local professionals with these credentials. Search for local contractors on Renowaze, where you’ll find a variety of contractors’ profiles, past projects, and customer reviews. You can also browse through galleries of makeover projects and design idea photos.
Consider why you are taking on a home improvement project in the first place. Whether it’s an absolute necessity (like trimming tree branches growing dangerously close to power lines) or strictly aesthetic (like refacing your kitchen cabinets), you are making an investment in your property. By working with a properly insured, bonded, and licensed contractor for home improvements, you can rest assured that you are spending your money and your time as wisely as possible.