Is Your Contractor Licensed and Insured? If Not, it Could Cost You

Is Your Contractor Licensed and Insured? If Not, it Could Cost You

Avoid These Contractor Red Flags
Kip Doyle
contractor meets client

Choose your contractor carefully.

If a contractor or repairman is doing work on your property, it’s critical that they are properly insured and licensed.

If your contractors are not fully insured, you could be held responsible if an injury occurs, Stacey McConnell, vice president of insurance with AAA Western and Central New York, said.

“If an underinsured contractor is hurt while working on your property, you could be held responsible for their medical bills, lost wages and more,” McConnell said.

Working with a fully insured contractor also makes it easier to resolve problems like damage to your property or faulty construction. Ask to verify your contractor’s general liability and workers' compensation coverage, and automobile insurance if applicable, before any work starts.

Proper licensing is also required for contractor labor. If an unlicensed contractor fails to follow local building codes and does not apply for the correct permits, your property value or your homeowner’s insurance policy could be impacted.

“If someone claims to represent a contractor but cannot show you a contractor’s license or home improvement salesperson registration card, call the contractor and find out if the person is authorized to act on their behalf,” McConnell said.

Property repair fraud usually involves unethical or incompetent building contractors who may not be licensed or insured. Consider it a red flag if your contractor:

  • Does not have a local office or local telephone number.
  • Is not willing to provide references.
  • Uses a hotel or restaurant as their contact location.
  • Handles all business in person, avoiding the use of mail.
  • Wants a full cash payment upfront.
  • Does not have adequate equipment to perform the job.
  • Gives an estimate that is very general.
  • Does not have a contractor’s license bond, if required.
  • Is unwilling to provide a certificate of insurance from their general liability or workers compensation insurance carrier.
  • Gives you a bid far below the bids you received from other contractors.

Your property is among your most valued assets, and a good contractor can help increase the comfort and value of your home or business. Reach out to AAA’ s local insurance agents with any questions you have related to insurance and contractors. 


Make sure your property is insured with great coverage with AAA.

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