Using Licensed Contractors for Home Improvement Projects

The benefits of using licensed contractors was the main feature of Angies List magazine this month. When we finished out our basement a few years ago price was the primary factor for which contractors we chose.  We narrowed it down to several contractors that had been recommended and picked the one with the lowest price, with no regard to which were licensed.

Contractor Pricing and Licenses

Looking back on our approach of going with the lowest price, it may be that the contractors we hired weren’t licensed.  The Angies List article looked at the variety of license fees required across cities and states and gave an example of one company in Cincinnati that pays around $30,000 a year to meet the requirements.

When companies spend that much on fees they often pass part of it on to their customers.  However, if a company isn’t licensed then they won’t pay the fees and can afford to offer the work for a lower price. The article suggested that you ask for proof of a license prior to hiring a contractor, the ones they spoke with said that customers rarely to see their license.

Liability Insurance

One of the main reasons the article recommends checking for a license is that typically in order to get a license a contractor will have to show proof of insurance. Their liability insurance should cover property damage and bodily injury caused by work.  However if they don’t have insurance and they get injured you could potentially have to pay for it if your homeowner’s insurance doesn’t cover it all.

Quality of Work

Of course the other reason to find a licensed contractor is that it’s supposed to indicate they’ve been through the proper training and testing and know what they’re doing.  Based on the range of local rules and enforcement policies it sounds as though the competence reflected by the license may vary depending on where you live. 

Ben Edwards, the founder of Money Smart Life, saved up enough to buy a Nintendo back when he was 12 years old. When he used the money to buy shares of Wal-Mart stock instead, he knew he wasn't like the other kids... His addiction to personal finance has paid off for his family and now he's helping you to afford the life that you want. Check him out on the web at Google Plus, Twitter and Facebook.

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