How to Check a Contractor's License and Insurance

Why this matters

A license tells you a contractor met the minimum bar your state or city sets for that kind of work and can be held to it. Insurance decides who pays when something goes wrong: a worker falls off your roof, a pipe joint lets go and floods the floor below, a truck backs into your garage. If the contractor's coverage is missing, expired or in someone else's name, that bill can land on you or your homeowner's policy. Checking both takes about half an hour, and it is the half hour that matters most in the whole hiring process, because it is the one thing you cannot fix after the work starts.

This article is the checking procedure. For the broader question of how to choose between contractors (references, communication, how the estimate is written), see related: Choosing a Contractor: What Actually Matters. This is not legal or insurance advice; your own agent and your state's licensing board are the authorities for your situation.

How licensing is layered, before you look anything up

Contractor licensing is not national. It is set by states, and sometimes by counties and cities on top, and it differs by trade.

• Most states license the trades that carry life-safety risk (electrical, plumbing, and often HVAC or gas fitting) at the state level, with exams and continuing education.
• General contractor and home-improvement licensing varies the most. California licenses contractors statewide through a single board, with classifications by trade. Texas licenses plumbers, electricians and air conditioning contractors at the state level but has no statewide license for general residential contractors, so a remodeler there may hold only a city registration or nothing at all. Some states use a registration with a consumer-protection office rather than a license with an exam.
• Cities and counties may add their own requirement, especially for permits. A contractor can be properly licensed by the state and still need a local registration to pull a permit in your town.

So the first move is to find out what your state and city actually require for the work you are hiring. Search your state's name plus "contractor license lookup" and the trade, and use only the result on a government domain. If the work needs a permit, the local building department can tell you what license or registration the permit requires. See related: What a Permit Means for You as the Homeowner.

Step 1: Get the license number and the exact business name in writing

Ask for the license number, the name the license is issued under, and the name on the contract. These three should match. Many contractors print the license number on their estimate, truck and website; some states require it on advertising and contracts.

Why the exact name matters. A license is issued to a person or a business entity. "Smith Plumbing" on the truck, "Smith Home Services LLC" on the contract, and a license issued to "John R. Smith" may all be the same operation, or may not. The lookup in Step 2 only proves something if you are checking the same name the contract is with.

Step 2: Look the license up on the board's own site

On the state or local board's lookup page, search by the number and confirm:

• Status is active, not expired, suspended, inactive or revoked.
• The name matches the contract name, or the board lists the contract name as an associated business.
• The classification covers your job. A license for one trade does not cover another. An electrical license does not cover replacing a roof, and a limited or specialty classification may not cover a whole remodel.
• Any listed bond or insurance on file, where the board records it. Some boards show the bond company and the workers' compensation status.
• Disciplinary history or complaints, where the board publishes them.

Take a screenshot with the date showing and put it in your records file. See related: Your House Records File and What Goes In It.

If it does not match: ask the contractor to explain before you go further. A recent name change or a new entity can be legitimate, and the board will usually show it. An unlicensed contractor for work your state requires a license for is a stop.

Step 3: Ask for a certificate of insurance sent directly by the agent

A certificate of insurance (often called a COI) is a one-page summary an insurance agent issues showing what policies a business holds. Ask the contractor to have their insurance agent send it to you directly, naming you as the certificate holder. Do not accept only a photo or a PDF the contractor forwards. Certificates are easy to edit, and an old one with a changed date looks the same as a real one.

When it arrives, read it against this map:

CERTIFICATE OF LIABILITY INSURANCE
DATE ISSUED: 04/02          (should be recent)

PRODUCER: agent name, phone (call to verify)

INSURED: Smith Home Services LLC
         (must match contract + license)

TYPE           POLICY  EFF     EXP    LIMITS
GENERAL LIAB   GL-xx   06/01  06/01  occ  X
  per occurrence / aggregate         agg 2X
AUTO LIAB      AU-xx   06/01  06/01  csl  Y
UMBRELLA       UM-xx   06/01  06/01  occ  Z
WORKERS COMP   WC-xx   06/01  06/01  statutory
  + EMPLOYERS LIABILITY               each W

DESCRIPTION: job address, if requested

CERTIFICATE HOLDER: you, your address
CANCELLATION: notice per policy terms

What each block tells you.

• Insured. The legal name covered. If it is not the name on your contract, the coverage may not respond to a claim from your job.
• General liability. Pays for damage the contractor's work causes to your property or to other people. Two limits appear: per occurrence (the most for one event) and aggregate (the most in the policy year across all events). A common structure puts the aggregate at twice the occurrence limit, as shown here.
• Auto liability. Covers the contractor's vehicles. Matters when a truck is on your driveway.
• Umbrella. Extra liability coverage above the other policies, if present.
• Workers' compensation and employers liability. Pays for injuries to the contractor's own workers. Without it, an injured worker may look to the property owner, which is the scenario homeowners most often do not see coming. Ask your own homeowner's agent how your policy treats it.
• Effective and expiration dates. Every policy must be in force for the whole job, not just on the day you sign.
• Certificate holder. You. This is what lets you request an updated certificate later.

Read the disclaimer, too. Most certificates say they are for information only and do not change or extend the policy. That means the certificate is evidence, not a guarantee. Being the certificate holder does not make you an insured.

Step 4: Check workers' compensation against the crew you will actually see

Workers' compensation rules are set by each state, and they vary in who must carry it. Many states exempt a sole owner with no employees. Some let certain owners exclude themselves. Texas is unusual in letting most private employers opt out of the system altogether.

So the question is not only "is there a workers' compensation policy" but "does it fit the people who will be on my property." If the certificate shows no workers' compensation, or an exemption, and the contractor says three people will be on the job, ask how those three are covered. Answers you may hear: they are employees and the policy is on its way; they are subcontractors with their own coverage (ask for those certificates too); or they are not covered. Your state's workers' compensation agency usually has a coverage lookup or an exemption registry.

Step 5: Call the agent to confirm

Call the agent listed on the certificate, at a number you look up yourself rather than the one printed, if you can find it. Ask three things: is the policy active, does it run through the end of my job, and is this the current certificate. It takes five minutes. Agents get these calls constantly.

Step 6: Check complaints and the paper trail

Look for complaints on the licensing board page, your state attorney general's consumer office, and your local building department's permit history if it is searchable. A long-established contractor with a few resolved complaints is normal. A pattern of the same complaint (abandoned jobs, unpaid suppliers, no permits pulled) is the signal. Unpaid suppliers matter to you because a supplier or subcontractor who goes unpaid may be able to file a lien against your property in many states. See related: Deposits, Payment Schedules and Lien Waivers for Homeowners.

A worked example: two contractors, one gate

The gate is simple: active license in the contract name, covering the work, and liability plus workers' coverage that fits the crew and lasts the whole job. Here is the same gate run against two bids for a kitchen remodel scheduled for ten weeks, starting in early May.

Contractor A. License lookup: active, issued to the same LLC on the contract, classification covers remodeling. Certificate arrived from the agent's own email. General liability runs to June 1, about four weeks into the ten-week job. Workers' compensation box shows an owner exemption, but the estimate lists a crew of three plus an electrician and a plumber as subcontractors.

Two problems. First, the liability policy expires mid-job. That is often just a renewal date, and the fix is simple: ask for the renewed certificate before June 1 and make the next payment depend on it. Second, the exemption covers the owner, not the crew. The homeowner asked; the crew turned out to be employees covered under a policy the agent had left off the certificate. A corrected certificate came the next day showing it, and the subcontractors' own certificates followed. A passed, with one condition written into the payment schedule.

Contractor B. License number on the estimate belonged to a person, not the business name on the contract, and showed inactive for the past year. Certificate was a phone photo of a form dated the previous year. When asked, the contractor said the license was "being renewed" and offered to have a friend with a license pull the permit.

That last offer is the decisive part. A permit pulled under someone else's license means the person responsible to the building department is not the person doing your work, and in many places it is not allowed. B failed the gate at Step 2 and never got past it.

What would have changed B's result: a renewal that the board's own site showed as pending, a current certificate from the agent naming the business on the contract, and the contractor pulling the permit under their own license. All three are things a legitimate contractor can produce in a day or two.

What to do if something does not check out

• A date or a name is off: ask for a corrected certificate from the agent. Most mismatches are paperwork and fix fast.
• The license is inactive or wrong for the work: do not sign. A contract with an unlicensed contractor for work that requires a license may leave you with fewer protections in some states, and some states bar an unlicensed contractor from enforcing payment. Ask your own attorney if you are already under contract.
• The contractor will not have the agent send the certificate: treat that as a no.

References

• See related: Choosing a Contractor: What Actually Matters
• See related: What a Permit Means for You as the Homeowner
• See related: Deposits, Payment Schedules and Lien Waivers for Homeowners
• See related: Your House Records File and What Goes In It
• Your state contractor licensing board and state workers' compensation agency (lookup pages)