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  • What do Contractors Mean When They Say Licensed, Bonded, and Insured?

    Published June 15th 2017 at 2:45pm

    Licensed. Bonded. Insured.  

    In the contracting world, there is a lot of emphasis on placed on these three words. Contractors make a point of using them on their websites and in their advertising. These words make the people using them sound credible, but what do they mean?  

    Below are explanations for what contractors are saying when they use these three words to describe themselves.  

    Licensed

    A licensed contractor is registered with and has a license to operate within the state they work in. Some states are more specific than others about which types of contractors need to be licensed, and what is required to get that license. Most states have an online database of contractors working in their state. Arizona has a  contractor inquiry tool  on the state Registrar of Contractors (ROC) website.  

    Bonded

    A bonded contractor has a bond. If you do not know what a bond is, think of it as a prepaid saving account with a bank or insurance company. The contractor has a specific amount set aside to give back if they do not complete a project according to contract. That amount is determined by how much work (in dollars) a contractor does each year. In Arizona, bond information is required for licensing. Bond information for a specific contractor can be found by using the ROC inquiry tool.  

    Insured

    An insured contractor will have general liability insurance (or GLI). There is no search online to verify a contractor has GLI. Potential clients need to request a copy of their contractor's certificate. They should then contact the insurance agent listed to make sure the GLI policy is active.  

    Having a licensed, bonded, and insured contractor working on a project is an important part of completing it. Knowing what those words mean and how to check a contractor's status  before you hire them  is even more so.  

    If you have any more questions about terms specific to the construction industry, drop us a line  here .

    Comments

    Posted By: Tomas

    If I have never worked as a contractor because I am trying to get a license, how am I going to have that predetermined amount in order to get a bonus.

    Posted On: 2021-08-07 03:42:41

    Posted By: Humberto

    If I own a concrete pump do I need a license or bond? Insurance is a must I know that.

    Posted On: 2022-02-14 18:57:29

    Posted By: AZCLC

    In reply to Humberto, you are not required to have a contractors license to own a concrete pump, but as soon as you start "installing and repairing concrete, concrete products, and accessories common to the industry" then a license would be required.

    Posted On: 2022-02-14 19:54:56