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Licensed, Insured, Bonded
As a consumer of building services you will usually see many advertisements
stating the service provider is “licensed, insured, and bonded”. Just what does
that term really mean and why is it important to the consumer?
Unfortunately, for some people in the building profession, the term “licensed,
insured, and bonded” means that they have a drivers license, life insurance, and
posted a bond last night to get out of jail. Obviously. none of these has any
importance to the consumer but the terminology can provide a nonprofessional
builder with the appearance of credibility. If you fail to understand the
specifics and ask the right questions, you could discover that you are
personally liable for any accidents or injuries that occur on the job.
Licensing
In North Carolina any person engaging in the contracting of a project for more
than $30,000.00 ($5,000.00 for South Carolina) must be licensed as a general
contractor. All electricians, plumbers, and HVAC folks must also be licensed.
All other residential building trades, e.g. painters, roofers, masons, etc.,
have no licensing requirement or availability. Many advertisements claim to
offer licensed services but you need to know what KIND of license they have. In
many cases, all they really have is a local county business license that allows
them to operate. It is much preferred to have a license by a professional
association that certifies their credentials.
Insurance
In the case of insurance, the details are critical. A number of builders only
carry general liability insurance and try to convince the consumer that is all
that is needed to protect the consumer. That is just plain wrong!
A properly insured builder or service provider
should carry workers compensation and general liability
insurance coverage to protect the consumer. Workers compensation insurance is
expensive, and many builders skip it and try to hide it. If your
builder does not have Workers Compensation insurance, you can be held liable for
the injuries, hospital costs, and lost wages of any person injured while working
on your property. Your homeowners insurance protects you against
injuries to guest, neighbors, etc. But it does not protect you with people
you employ to do work at your home.
Bonding
In the residential construction market, bonds are rarely used. Most bonds are
required by the city or county issuing a building permit to ensure they receive
payment for the permits.
Recommendations:
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Always require your
builder's insurance carrier to mail a copy of their insurance certificate to
you, and have the carrier list you and your address as the certificate
recipient.
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Read the
certificate to verify that the builder or service provider has an active
policy providing general liability coverage of at least $1,000,000.00 Workers
Compensation, and vehicle liability coverage of at least $5,000,000.00.
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Do not accept a
copy of an insurance policy from the builder or service provider. Some builders
will carry insurance for a few weeks, cancel the insurance policies, and make
copies of an expired insurance policy for you.
A false claim made of
being “licensed, insured, and bonded” can represent fraud. ALWAYS make sure
these key elements are covered in the agreement with your builder.
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