‘Licensed, Bonded & Insured’ – What the heck does that mean??

Licensed Bonded Insured

So you have probably seen the phrase ‘licensed, bonded and insured’ on the side of contractors’ vans and on their business cards, but do you actually know what any of these terms mean?

If you don’t, no need to worry. Below are straightforward definitions for these 3 very important contractor credentials.


If a contractor is licensed, it means they have been granted a trade license as mandated by state and local laws. It typically requires completing business practice and trade skill tests, paying a fee and providing proof of insurance and/or bonding.


If a contractor is bonded, it means they have an arrangement with a third party (a private bond issuer or a recovery fund held by the licensing municipality) to reimburse homeowners if they cause physical or financial harm (due to poor work or failure to pay subcontractors)


If a contractor is insured, it means that they have an arrangement with a third party to pay claims should property damage or physical injury occur. Insurance typically falls into two categories: liability and workers’ compensation.

Liability covers property damage and injuries caused by a contractor’s work.

Workers’ compensation provides payments to injured workers for lost wages and medical services. It also provides benefits to a contractor’s family in the event of death.

A Better Business Bureau Study found that nearly 40% of contractors who claimed they were licensed, bonded and insured failed to provide documentation supporting their claim. Before you take a contractor’s word at face value, ask them to provide you documentation so you can verify their credentials.

Sign up on http://www.myhomespree.com to get early access to our application that enables you to request project estimates from prescreened contractors directly from your smartphone.

7 Tips for Hiring a Contractor

Spring Home

It’s finally spring! Which means yard work, painting and pool openings are right around the corner. If you aren’t the do-it-yourself type, you’ll probably rely on a professional to get the job done. Before you shell out any hard cash to an unfamiliar contractor, it’s best to do some prep work.

Here are a few things you should to keep in mind when hiring a contractor:


Check to make sure your contractor holds a valid license. Each state has different rules; visit contractors-license.org to view requirements in your area. Make sure that they also have a clean bill of health from the Better Business Bureau and from your state’s consumer protection agency.

Bonding & Insurance

Bonding provides assurance that the contracted work you hired out will be satisfactorily completed. It is a third party’s obligation promising to pay a penalty if a vendor does not fulfill its contractual obligations.

Insurance, on the other hand, covers liability issues that may arise in the course of someone’s work.


Quality contractors will provide you with a list of past clients whom you can call upon for a reference. Be sure to ask questions regarding the contractor’s punctuality, cleanliness, work ethic, attention to detail, personality, etc. Depending on the size of your project, you may be working with your contractor for several months. Finding someone who is easy to get along with can tremendously reduce frustration during the process.


The saying ‘a picture is worth a thousand words’ is certainly true when it comes to the quality of a contractor’s work. While a home professional may be licensed and insured, these criteria speak nothing about the quality of their work. When you contact a contractor’s past referrals, be sure to ask for a few photos.


Remember that price is always a tradeoff. Some contractors may be able to give you a lower price because they have less overhead costs as a result of a smaller team with no office assistance, but hiring such a contractor may extend your timeline and/or lead to communication issues.

By receiving 3-5 estimates from various contractors, you’ll be able to infer a fair price for your project.


Every project should have a contract, no matter the size of the estimated work. The contract should include a work timetable, start and finish dates, a description of the work, materials, a payment schedule and warranties.

Payment Schedule

Be very wary of contractors who require significant payment before beginning the job. Larger projects may require a portion of funding upfront to finance material purchases. If this is the case, you should have the contractor provide a material list and place the orders yourself. Otherwise, you and the contractor should set project milestones and a payment schedule within the contract.

Homespree is building a platform to help you find quality contractors and get estimates directly from your smartphone. Stay tuned on our blog for information on our upcoming application release and sign up for beta at www.myhomespree.com.