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Licensed, Bonded & Insured – That Is Great But What Does It Mean And Why Should I Care?

May 6, 2021


You have probably heard the terms Licensed, Bonded, and Insured touted from contractors and service providers that are bidding on the work that you want to be done to your home. But you may have wondered what that really means, and why should you really care about that anyway? And you may have noticed that those same companies that are telling you this information about them have a bit of a higher estimate for the work being done then the ones that aren’t telling you that, ever wonder why? Well, these 3 words should be very important to a consumer, so we are here to tell you what they mean and why they actually protect YOU. 

Let’s start off with what they mean….

  • Licensed – This means the contractor has gained experience and knowledge through the proper training and legal processes and they maintain the licensing standards. They put in the time to obtain the appropriate licenses and permits from authorized government offices, after passing the licensure test.  They are making a legitimate career out of this profession and can truly call themselves professionals, and are not simply making a quick cash grab. Acquiring a license is a costly endeavor for the contractor to achieve and then maintain, which shows their commitment to being certified and legal and ability to obey the laws and coded that oversee their license. A license ensure the contractor won’t cut corners when it comes to their work on your project. On the other hand, an unlicensed contractor cannot give you the same assurance. In fact, because they are an unlicensed individual, they have to cut corners to get the job done. For instance, an unlicensed contractor will not be able to attain any permit that is required on a given job.
  • Bonded – A company being bonded is 100% for the consumers benefit. If a contractor is “bonded”, it means that you are financially protected if the contractor doesn’t complete a job for you, or the job is poorly executed. If a contractor does not fulfill their obligation then a claim can be filed against the bond, which they will be responsible to pay or correct. This means if a contractor says they are going to do something and they take your money and they don’t do the work or they don’t do it properly and in accordance to code then as the consumer you can file a claim and they will have to make things right with you. So working with a bonded contractor means that you investment is safe and you aren’t going to get ripped off. 
  • Insured – Working with a insured contractor should be of the upmost importance to you as it covers two very important potential costs for you. First, it means they have workers compensation insurance, this is important because if a contractor or one of their crew gets injured on the job it is the workers compensation that covers the cost of their injury.  If they don’t have this insurance it is actually you, the consumer, that is liable and will get hit with the hospital bill for that injured  worker, and a hospital bill can easily be $10,000+ from an injury. Oh and a fun fact, your homeowners insurance also likely will NOT cover this cost because they consider you liable for hiring an uninsured contractor. Secondly, it means they have general liability insurance to cover damages that could occur from the work. For instance, they scratched your hardwood floors with their equipment or they improperly fixed your plumbing and it caused your basement to flood. Their insurance would cover these costs and ensure you don’t have to pay to have issues fixed that they caused. 

Now that you know what all these terms mean and why as a consumer they are important in protecting you, we can move on to why those estimates seem to a bit higher than the others. 

Well as we mentioned before the cost to become licensed isn’t small and it isn’t a once and done cost, you continue to pay every couple years to maintain your license. Then their is the cost to be a bonded and insured contractor. We all have car insurance and for that insurance you know that it is an annual or monthly cost that is quite large and for this type of insurance it goes up depending on the size of the organization. Then the is the cost for their work vehicles and the insurance and maintenance on them as they travel to you. All these costs add up so their bid is likely to be higher than someone who doesn’t carry the licenses, bonded, and insurance.

Hiring a contractor that is not licensed, bonded, and insured means that you take all of the financial risks in the contract. If that worker walks away from the job, gets sick, goes bankrupt, etc., you would lose a lot of money. Of course, you can get a lawyer to handle such a case, but all you could get is a bill from your lawyer and stress.

Now is the scary truth, you should be one to think “well I doubt anything will happen, it is pretty rare anyway” in Maryland alone from 2012-2014 there were over 4,400 claims against contractors. 

Licensed, bonded, and insured are more than a line that contractors say to get you to close the deal they are three words that should mean everything to you as the consumer. Don’t get caught with unforeseen costs due to hiring “the cheap guy” because sometimes you may think that person is going to save you money but in the end because of damage, injury, or poor workmanship that “cheap guy” may end up costing you a whole lot more. 

Chesapeake Electric is a licensed, bonded, and insured electrical contractor, with expertise in both residential electrical and commercial electrical work. For a free estimate  contact us

Licensed, Bonded, Insured Contractor
Licensed, Bonded, Insured Contractor