You used to be able to count on a handshake from a businessperson as her word on fulfilling a promise or a contract. Nowadays you need a handshake and a prayer and documentation to back up the claim of professional service.
Checking on a contractor’s license and proof of insurance can be as easy as a few phone calls or doing a little research on the Internet, and may well save you a lot of headaches and expense in the long run.
- Gather information regarding your prospective contractor such as the name of the owner and his business, in what city, county and state they are licensed and, if possible, their business and contractor's license numbers.
- Research your contractor on a website such as contractors-license.org or visit a state- or city-specific website by searching for "Oregon contractor’s license" or "Los Angeles contractor’s license." Contractors-license.org will allow you to choose a state and follow the links within the state for additional information. This site also lists the contact information for the state-specific departments of commerce. Most query results for contractor licensing are state- or city-specific.
- Call your state or local department of commerce and request a copy of the contractor’s license and information regarding any complaints against their business.
- Ask the contractor for a copy of their license and proof of general liability insurance. According to contractor-license.org, all construction contractors that do not work on an hourly basis are required to hold general liability and workers compensation insurance.
- Request a copy of the contractor’s certificate of insurance to determine if the policy is in force, whether their policy limits are adequate for your project, and when the current coverage period expires. Your contractor should provide you with their insurance carrier’s name, contact information and policy number to make this an easier task.
If a project will last for several months or if you start a second project with the same contractor, ask to see the license and proof of insurance every few months. Policies can lapse or be cancelled due to non-payment or other reasons, and this fact may be hidden by the contractor.
Do not pay cash deposits for work being performed. It is best to pay in smaller increments, as stages of the job are completed, using a personal or business check. Cancelled checks are considered evidence of a binding contract between two parties should you need to take a contractor to civil court for unfinished or inferior work.
- If a project will last for several months or if you start a second project with the same contractor, ask to see the license and proof of insurance every few months. Policies can lapse or be cancelled due to non-payment or other reasons, and this fact may be hidden by the contractor.