Dear Angie: What's the difference between a contractor being insured and being bonded? — Farhad R., Clarksburg, Md.
Answer: A contractor's bond and insurance are important forms of protection for you, the consumer. They help ensure that you're more likely to be working with a reputable professional, and they provide some recourse should something go wrong.
Bonding protects the consumer if the contractor fails to complete a job, doesn't pay for permits or fails to meet other financial obligations, such as paying for supplies or subcontractors or covering damage that workers cause to your property.
Our team interviewed experts who say that to be bonded, companies typically pay a premium to a surety company. You can ask a contractor for a bond number and certification, through which you can confirm he or she is appropriately bonded. In addition, you can contact the surety company directly if work isn't completed or you think it's subpar.
Requirements for bonding vary depending on the state and municipality where you live, so it's important to do your research before you hire a contractor.
As for insurance, there are two common types: liability and workers' compensation.
Liability insurance covers such situations as contractor-caused damage to your property, although it typically doesn't pay for repairing or replacing shoddy work. That is the reason for the bond.
Workers' compensation provides payment to injured workers for lost wages and medical services, regardless of who was at fault. Workers' compensation coverage also will provide benefits to the contractor's family in the event of a work-related death.
Making sure a company is appropriately insured is equally important to ensure you will be satisfied with your project in the long run.
Ask the contractor for certificates of insurance and check to make sure the policies are current.
While you're checking to see whether companies are insured and bonded, don't forget to inquire about whether the contractor's particular trade requires a license.
States often require specific licenses for particular trades, such as electrician, plumber or HVAC. To find out about your local requirements, try this online tool, Angieslist.com/licensing.
In many states or localities, if a contractor is not trade-licensed, he or she might not be able to be insured or bonded. Also, be aware that a building inspector can halt work on a project if it's being done by improperly licensed contractors.
Making sure you hire an appropriately licensed, insured and bonded contractor might seem like extra work, but it helps ensure that you and your interests are protected, and gives you more assurance that you're working with reliable, reputable professionals.