Contractor licensing glossary

Contractor licensing glossary

Licensed: Contractors have been granted a trade license as mandated by state and local laws. It generally requires passing competency tests about business practices and trade skills, paying a fee and proving insurance and/or bonding.

Registered: Typically less stringent than licensing, it often requires contractors to prove insurance and pay a fee, only sometimes requires bonding and rarely tests competency. A few places use licensing and registration interchangeably.

Bonded: Contractors have an arrangement with a third party (a private bond issuer or a recovery fund held by the licensing municipality). Homeowners may petition for reimbursement through that third party if contractors harm them financially because of shoddy work or failure to pay subcontractors as promised.

Insured: All contractors you hire should be insured. Ask to see a Certificate of Insurance, then call to verify the policy is current and has enough coverage for your project. The two most common types:

Liability Covers property damage and injuries caused by the contractor’s work. It will not normally pay the cost of repairing or replacing bad work; that’s the purpose of a bond.

Workers’ comp Provides payments to injured workers, without regard to who was at fault in the accident, for lost wages and medical services. It also provides benefits to the contractor’s family in the event of death. In most cases, if the owner is the only employee, workers’ comp is not required.


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