Washington State requires businesses in the construction trades to be registered as contractors, which includes being bonded and insured. These requirements help inform and protect consumers from fraud, damages, and liability. Simply put, hiring a contractor who does not meet this criteria puts consumers at significant risk. Skimping on credentials to get a job done cheaply or not verifying a contractor’s legitimacy is risky business, often costing consumers thousands of dollars.
Following is a detailed explanation of the terms Licensed, Bonded, and Insured and how the state requirements are designed to protect consumers.
LICENSED
The Washington State Department of Labor & Industries requires contractors be licensed as either a general contractor or a specialty contractor, such as drywall or painting. Licensed electricians, plumbers, elevator mechanics, and manufactured home installers require special certification, in addition to a license.
The contractor’s license number must be posted on any marketing materials such as their website, business card, or print advertising. Anyone can visit the Department of Labor & Industries website and verify a contractor by name, license number, workers’ comp account, or UBI number. This search will tell you if their license, bond, and insurance premiums are current, if they have any safety violations or citations, and allow you to track a contractor.
Once licensed the contractor is bound to comply with state building procedures and standards. If a property owner hires a contractor that is not licensed, they may not be protected by state policies. There is often very little that can be done if an unlicensed contractor disappears from a partially completed job or does a job incorrectly. News stories regularly report contractors disappearing with deposits or full payment, botched jobs requiring even more money to re-do them correctly, and sometimes much worse.
BONDED
Contractors licensed in Washington State must be bonded. A bond is essentially a pre-paid savings account with a bank or insurance company that sets money aside in the event a project is not completed according to the contract. This bond or agreement, binds the contractor to the contract with the property owner. If the work is not completed according to the contract the bond will cover any expenses (up to the bond amount) required to complete the job satisfactorily.
General contractors are required to hold a $12,000 bond and specialty contractors a $6,000 bond. If the project is expected to exceed these amounts, the property owner can ask the contractor to post a performance bond. A performance bond covers the full cost of the project and guarantees the property owner compensation for any monetary losses if the job is not completed according to contract. Only the property owner can make claims against a performance bond but it is important to ensure the contract is very specific about the work to be completed.
INSURED
Licensed contractors in Washington State must also carry general liability insurance. Minimum requirements include $50,000 in property damage and $200,000 in public liability, or a $250,000 combined single limit policy.
Damage to persons or property due to contractor negligence may be covered by this policy. In some cases, the property owner could be held liable for personal injury if the contractor does not have insurance.
If the contractor has employees they are required to have a workers’ compensation and industrial insurance policy. Contractor employees injured on the job would be covered by this policy. To verify if a particular contractor’s employees are covered, first pull up the contractor details and click on the link to Verify Workers’ Comp Premium Status.
DO YOUR DUE DILIGENCE
In addition to working with a licensed, bonded, and insured contractor, there are several other steps to ensure your home improvement project goes smoothly.
Meet with several qualified contractors and solicit comparable bids. Once you narrow down your choices, speak with several references, particularly of jobs that are similar to yours.
Once you decide on a contractor and the project begins, meet with the contractor regularly. Make sure work is progressing according to the contract and schedule. Check that the proper permits have been obtained and required inspections are conducted.
Once the project is completed, do a final walk-through with the contractor and make sure all punch list items are satisfied before making final payment. If you request lien release documents, avoid making final payment for work performed until you have received the lien release.
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