The Contractors State License Board strongly recommends that homeowners ensure that their contractor secure liability coverage before beginning a project. Being properly insured means a contractor has a minimum of $1 million General Liability Insurance to cover any accidents or other risk exposures during the course of their work.
Let's say the hired contractor forgot to turn off the water before a bathroom demolition, and they hit a pipe, flooding your home. Their insurance should cover the damages up to the amount of their coverage limits.
To verify coverage, ask to see a copy of the remodeling contractor's certification of insurance for the name of his or her insurance agency.
When a contractor is bonded, it means he or she has a general bond and can acquire specific bonds for jobs. A contractor's performance bond offers financial assurance that a project will be completed to the owner's satisfaction. If the contractor goes out of business, vanishes, or dies before the project is properly completed, the bonding company will step in to address the costs of having another firm finish the job.
Licensed contractors in California are required to carry a contractor's license bond of $12,500. Contract bonds guarantee both the completion of a contractor's jobs and payment for all labor and materials, and are written to cover any projects the contractor agrees to perform. Be aware: such bonds are often not enough to cover multiple complaints made against it or for projects whose total value exceeds the coverage amount of the bond.
In general, the bonding company will not be bound to pay more than the face amount of the bond. The cost of a bond is usually one to two percent of the contract price. Learn more about bonds at the California Contractors State License Board Web site.
All of these qualifications offer protections to homeowners and help them avoid financial and legal complications during your project.
Getting three separate bids from three different contractors is wise, but make sure each contractor is bidding on the same scope and quality of work. As a general rule, the lowest price is usually not the best deal, and the highest price doesn't necessarily mean the best workmanship.
Additionally, it's a good idea to consider the level of quality, professionalism, and service you will expect from your future contractor. Once that consideration has been determined, and you approach three similar contractors to complete the bid process, you'll be able to make a more informed cost decision.
The bid should break out what you are getting for your money; a one-page proposal with a price at the bottom usually doesn't offer enough information, especially for longer projects.
Also, it should be clear on the bid who is going to perform the work. "Unfortunately, there is a flood of contractors who will do the sales pitch and then hire unskilled laborers to do the job," Larson points out. "Let's say I bid on a repair for $5,000, and someone else says they can do it for $2,500. There's probably a reason why it's half the price. When homeowners compromise on the price, they may also be compromising on the quality."
If you're re-roofing, don't get bids for several different roofing systems. Figure out what system (and what extras) you want first, then put it out to bid with companies that represent that system.
Once you've figured out whom to hire, the contract is the next step in any remodeling project. It's the item that spells out the expectations of both the homeowner and the professional.
Here are key elements a good contract should include: