In this weeks installment of our “Industry Need to Know” we help cover a topic that is going to be very important for new entries into the work force and potential future entrepreneurs, and that is the concept of a contractor bond. Professionals often say that hiring a bonded, licensed, and insured contractor is to keep yourself protected. Apart from the security that these contractor bonds provide, they serve as an agreement between you, the licensing agent, and the contractor that the job will be finished within a specified period of time. In the event that the job is done according to your standards, the issuing agent will fully compensate you for what has happened. Often, licensing agencies expect the contractor to be bonded before they can qualify for their contractor license.
How to assess whether your contractor is bonded
Since this requirement changes from state to state, your work as a homeowner is to verify that you hire a contractor who is both bonded and licensed to ensure that the job will be finished within a specified period of time and in the best way possible. For instance, some states may only require licenses while others require a proof of both bonding and insurance. If you are embarking on a major home improvement process, it is advisable to familiarize yourself with your area’s requirements. To confirm whether your contractor is bonded, you need to ask them about their certification and bond number. As a matter of fact, the bond and the license should be up to date.
What the contractor bonds covers
This bond will not only protect you from an insufficient job but will also cover you in case the contractor quits the job midway for whatever reason. More so, many homeowners do not know that the contractor bonds also protect them from being saddled because of unpaid bills or the cost of unpaid employees who were helping with the job. Also, the bond will cover any damage to the property that may result from contractor’s carelessness or loss of property. Typically, the agency involved act as surety for the homeowner. Hence, the contractor must pay an annual premium to ensure that the bond is renewed.
What to remember when shopping for a contractor bond
- Check your credit; ideally, the insurance agent has many companies that can write the bond. Knowing what kind of credit you have will determine the type of bond to look for. Also, information about your credit could double the price of your bond
- Get your bond file together; you should allow the insurance agent to look for which company will charge the least amount. This will also allow you to save money on postage this will eventually ensure that you reduce stress.
- Have a good relationship with your company; if you have a good relationship with your company you will improve the ability for the bonds to be approved faster.
- Get your bonds files together; in essence, start a file in your computer or a paper file and ask your agent about anything else that they may need. Use irrevocable letters, taxes, and bank statements to start your file. If you have an up to date resume you will make your underwriters feel very much at ease.
Contractor Bonds do not only benefit the homeowners but the contractor as well since many people are always reluctant to hire a contractor who does not have a bond in place.