What’s the Difference Between Being Bonded, Licensed, and Insured?

what's the difference

Many contractors claim to be licensed, bonded, and insured, but what do those distinctions mean? Familiarize yourself with the difference between bonding and insurance and how they protect homeowners.

What does it mean to be bonded?

Being bonded means the contractor has taken action to purchase a surety bond, providing a level of liability protection for the client should the contractor fail to complete the contracted work properly.

Bonding protects homeowners if the roofer does not complete a job, fails to acquire the proper permits, or doesn’t pay for subcontract work or the damage their workers might cause to your property.

Contractors typically become bonded by paying a premium to a surety company, but not all roofers want to pay this premium, so always be sure to ask during the hiring process whether they are bonded or not. Don’t just take their word for it either. Ask the roofer for the bond number and certification so you can confirm if he or she is actually bonded.

If you believe your project was not completed or the workmanship was below average, you can contact the surety company who issued the bond to receive (some) compensation.

How do I receive payment from the bond?

Homeowners have to win a claim with the state contractor’s board proving that the roofer failed to adequately perform the work. Usually, before that takes place, homeowners will have to try and collect the money they gave the contractor before the claim goes to the bond. Unfortunately, it's rare for a contractor who performs poor work to pay you back the money you gave them.

Bond payments depend on the size of the bond the roofer had and whether there are other claims against it; and while bonds do help homeowners recoup some of their money, the amount oftentimes will not equal the total amount you paid the contractor due to the volume of work they perform. However, each state is different and some contractors buy larger bonds than required by law.


What does it mean to be insured?

Roofing contractors who are insured usually have two types of insurance: liability insurance and workers' compensation.

What does liability insurance do for a homeowner?

Liability insurance protects homeowners against contractor-caused damage to the property but usually will not cover repairing poor workmanship. (This is where being bonded comes in.)

What does workers' compensation do for a homeowner?

Worker’s compensation covers injured workers for lost wages and medical bills regardless of how the injury occurred. It also pays the contractor’s family in the event of a work-related death.

How can I ensure my contractor is insured?

Ask to see their insurance certification(s) and follow up to make sure the policies are current and in place. An insured contractor has the protection to keep your bank account safe, so it pays to double check.

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What does it mean to be licensed?

find out if a contractor is licensed

Another important factor to check on is whether or not the contractor is licensed to perform the work in that state.

Different states require different licenses for roofers. In many states, if a roofing contractor is not licensed, they might not be able to get insurance or become bonded. In addition, building inspectors can stop work on a roofing project if unlicensed contractors are performing it.

It takes some extra work to check if a roofer is properly licensed, insured, and bonded, but doing so will help protect your home and bank account, and gives you the assurance that you’re working with a truly competent contractor.

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