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Why You Must Hire a Licensed and Bonded Contractor

Summary: Are you about to dive into a renovation project and in the middle of evaluating contractors? If so, you might have come across the question, is it OK to hire a contractor who isn’t licensed and bonded? This is an important question that you must get right if you are to protect your investment. Because getting it wrong could mean significantly higher construction costs and killing your cashflow.


[Disclaimer: We are not accountants, lawyers, or financial advisors, so please consult your own team of professionals about the topics covered in this article.]


If you’re about to kick-off a home improvement project or major renovation, one of the most important decisions you’ll make is choosing a contractor.

While it may be tempting to opt for a cheaper, unlicensed individual or company, there are several reasons why hiring a licensed and bonded contractor should be your priority.

In this article, we’ll explore the significance of this choice, the potential risks of hiring an unlicensed and unbonded contractor, who covers the bond costs, and how to file a claim against a contractor’s bond.

What does licensed and bonded mean?

A licensed contractor refers to a professional who has obtained the necessary licenses to legally perform certain types of work, typically in construction or home improvement. Being licensed means they have met the standards and qualifications set by governing bodies, ensuring they have the necessary skills and knowledge.These governing bodies oversee licensed contractors, holding them accountable for their work quality and conduct. In contrast, unlicensed contractors may lack such oversight, leaving homeowners vulnerable to subpar work and disputes.

Bonded contractors have obtained a surety bond, which is essentially a form of insurance that protects you, the homeowner, in case the contractor fails to complete the project or fulfill contractual obligations. This bond provides a financial safety net.

Why Hiring a Licensed and Bonded Contractor Matters

Licensed contractors have undergone specific training and often must pass exams to obtain their licenses. This process ensures that they have the necessary skills and knowledge to complete your project professionally and up to code. They are typically well-versed in local building codes, regulations, and permit requirements. This knowledge helps ensure that your project adheres to legal standards, preventing potential issues down the line.

The Risks of Hiring an Unlicensed and Unbonded Contractor

Unlicensed contractors may lack the necessary skills and experience, leading to subpar workmanship, structural issues, or safety hazards in your home. Hiring an unlicensed contractor could result in violations of local building codes and regulations, potentially leading to legal complications and costly fines. Without a surety bond, homeowners may be left financially responsible for unfinished or poorly executed projects if an unlicensed contractor defaults or disappears.

One of our licensed and bonded contractors!

Who pays for the bond?

Typically, it is the responsibility of the contractor to pay for their surety bond. The cost of the bond varies depending on factors such as the type of work, the contractor’s credit history, and the bond amount required by the state or local licensing authority. Some contractors may pass a portion of this cost onto clients as part of their overall project estimate.

Filing a claim against a contractor’s bond

If you have hired a licensed and bonded contractor and encounter issues, you can file a claim against their bond to seek compensation for the problems or unfinished work. Before filing a claim, attempt to resolve the issue directly with the contractor. Many problems can be resolved through communication and negotiation.

Collect all relevant documents, including your contract, receipts, photos, and any correspondence with the contractor.

Contact the Bonding Company: Obtain the contact information of the contractor’s bonding company. This information is typically available on the bond certificate provided by the contractor.

File a Claim: Reach out to the bonding company and follow their specific claims process. You will need to provide documentation of the issue and evidence that the contractor failed to meet their contractual obligations.

Investigation and Resolution: The bonding company will investigate the claim and determine whether to compensate you. If the claim is valid, they may pay for the necessary repairs or completion of the project, up to the bond amount.

Why you must hire a licensed and bonded contractor

Hiring a licensed and bonded contractor is crucial for ensuring the quality and legality of your construction or renovation project. While it may come at a slightly higher initial cost, the peace of mind, accountability, and protection provided by a licensed and bonded professional are well worth the investment. In the unfortunate event of issues, the bonding company serves as a safety net, helping you secure the resolution and compensation you deserve.

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Semi-Retired M.D. and its owners, presenters, and employees are not in the business of providing personal, financial, tax, legal or investment advice and specifically disclaims any liability, loss or risk, which is incurred as a consequence, either directly or indirectly, by the use of any of the information contained in this blog. Semi-Retired M.D., its website, this blog and any online tools, if any, do NOT provide ANY legal, accounting, securities, investment, tax or other professional services advice and are not intended to be a substitute for meeting with professional advisors. If legal advice or other expert assistance is required, the services of competent, licensed and certified professionals should be sought. In addition, Semi-Retired M.D. does not endorse ANY specific investments, investment strategies, advisors, or financial service firms.


Hi, we’re Kenji and Leti

we provide coaching and mentorship for doctors and high-income earners

Several years ago, we were newlyweds working as full-time hospitalists. On paper, it looked like we had everything: the prestigious careers, the happy marriage, the luxurious rental home, the cars, etc.

But in reality? Despite having worked for several years, we had very little savings. Despite our high income, we had very little freedom in terms of time or money.

One thing was clear: we had to do something.

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