Insurance and Contractor Bonds: Fundamental Differences

Insurance and contractor bonds are two requirements that every contractor should have. But why?

Insurance

The extent of insurance coverage varies from contractor to contractor, but there are only really two types that are required. One is liability insurance, which covers accidental property damage. If the contractor causes damage to property or part of the house during remodeling, liability insurance provides coverage.

The other is workers’ compensation or simply “workers comp”. It provides insurance coverage for the contractor’s employees in case of illnesses or workplace injuries. Responsible new addition contractors would, of course, provide safety precautions, equipment and training to help minimize accidents from happening. After all, insurance is a safety net: it’s better to be in a situation where you won’t need your insurance.

Contractor Bonds

Contractor bonds, or contractor’s license bonds, place conditions on contractors to comply with state and federal laws that are applicable to contractors. A non-compliant contractor – such as one who builds a home addition that’s not up to code – may face a claim against the contractor bond, filed by the licensing board. If the claim is legitimate, the bond pays out to the claimant, and then the contractor repays the bond surety. For clients and homeowners, this is their assurance that the remodeling work, and subsequent repairs or corrections, will comply with applicable laws.

Does Your Contractor Have to Have Both?

The short answer: yes. There are exemptions that vary depending on factors like project types and insurance providers. Some contractors may also have additional insurance coverage or guarantees for delays or weather-related damage. But what’s important is your contractor needs to be bonded and insured so you are protected against liability for property damage, sickness or injuries, or the costs associated with correcting non-compliant work.

Design Build Remodeling Group of Maryland is your leading provider of remodeling services. Give us a call at (443) 230-4070, or fill out our contact form. We serve customers in Columbia, MD, and surrounding areas.