You need some work done on your home and you look through the yellow pages for the names of some contractors who may be able to do it for you. You notice that some of them are listed as being "bonded" or "insured" while others are not. What's the difference between a bonding and insurance? Does a contractor really need either of these things to be trustworthy enough to work on your house? Housemaster Home Inspections wants to know if you would hire an uninsured or unqualified electrician to rewire your home? We think not. We can answer these questions and more.
When a contractor is bonded, it means that you have a guarantee that the job will actually get done. One of the most common problems with contractors is that they'll leave a job unfinished and disappear. If you hire a home builder who are bonded, you can make a claim against the bond to recoup your lost money and get compensation for the time and effort it will take you to hire someone else to finish the work or to correct work that was done badly. Therefore bonding is almost like work completion insurance.
By contrast insurance is mostly to cover any mishaps or accidents that happen on the job. If you hire a contractor who is not insured to work on your house, if any of his or her employees fall off the roof, injure themselves with a saw, or otherwise hurt themselves, they would be able to make a claim on your home insurance and your premiums would go up. Whereas if the contractor is insured, it would be his or her insurance that would cover the claim.
Therefore ideally you would want to hire a company that is both bonded and insured. If you don't, you're taking a risk. Even if it's a friend or relative, he or she may be tempted to take your money and run when they're supposed to be buying custom cabinets in New York for your kitchen, or fall off the ladder and be unable to work for months. Remember: most of the plaintiffs on Judge Judy are people who trusted the wrong person with their money.
Even if it says 'bonded and insured' in their ad, don't just take their word for it. As to see proof of their insurance and bond and if they won't show it to you, be immediately suspicious. You can also look them up with the Better Business Bureau, as reputable companies go out of their way to be listed with them and sketchy companies always end up coming to their attention.