Hiring a Service Contractor: What you need to know about proper licensing and insurance

If you own a home you most likely have hired a service contractor.  The same goes for HOA Communities that are governed by a Board of Directors or a Property Management Firm. Whether for repairs or regular maintenance, picking the right landscaper, power washer, plumber, electrician, handyman or pest control company is important.

So often homeowners and HOA's are tempted to want to find the cheapest price, but expect the best service.  While this combination is not impossible, it is highly unlikely.

Each state is different when it comes to proper licensing and insurance but there are some basic rules to follow to protect your investment from damage and other unforeseen expenses.

Licensing:  

While most states require a Business License, some local municipalities also have licensing requirements.  To save time, when you begin your search, check with the state (most have online access) to get a list of licensed contractors for the service you are in need of.  Check to make sure their are no additional licensing requirements specific to their trade.

One you have a list of licensed contractors its time to request some bids.  At the time of the request, ask WHAT KIND OF insurance they carry.  When asked if they HAVE insurance, most contractors will answer "YES", but do they have the right insurance?

Insurance:

Commercial Auto Insurance: Any vehicle that is used on your property to perform services needs to be covered under a commercial auto policy, no exceptions.  A vehicle under a personal policy does not have proper coverage to be engaged in business and coverage could be denied if there is an issue.  If the job requires a subcontractor, they too need to have the commercial coverage.  Many times the homeowner or HOA is not informed that subcontractors will be involved so its important to ask if the persons performing the service are indeed empoyees.

Liability Insurance:  Liability insurance is important but the wrong coverage could leave you with a false sense of security.  Liability coverage is broad so understanding what to look for is important.  General Liability Insurance excludes personal property that you have given the contractor care, custody and control over, including the item they are working on.  For example, if you hire a power washer to wash your siding and they use high pressure and damage the surface of your siding, Liability insurance will not cover the damage unless their policy has "care, custody and control".  "Voluntary property damage coverage" will cover cases where while performing a service, real property is damaged.  For instance, While power washing, water leaks into the home and damages carpet.

Workers Compensation Insurance:  Any companies with employees should have a workers compensation policy in place.  When employees are at your home, accidents can happen.  Falling off a roof or ladder can lead to serious injury or death.  While working with tools and equipment there is no end to the injuries that can happen.  In addition, something as simple as an employee slipping and falling can turn into a serious injury.  If the company has Workman's compensation insurance the employee is covered for any medical expense, accidental death/dismemberment and loss of work.  Without this coverage, and/or if the individual is not a real "employee", you are at risk to be sued.  Some smaller companies will claim they have a waiver from the state but this waiver only applies to the owners of the business.  If multiple workers are needed for the job, most likely they should have this coverage.

No matter how large or small the job, professional companies will be able to provide proof of these three important policies.  Additional coverages are needed when a service provider must enter the home.

Next time you are in need of a service contractor inquire about proper licensing and insurance.




We are a professional exterior cleaning company that services both residential and commercial clients in Maryland (Eastern shore and beaches) Delaware and Suburban Philadelphia (Pennsylvania). 

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