Hiring Licensed Contractors: How to Verify & Protect Yourself

Hiring a licensed general contractor — whether for a construction project, renovation, or ongoing maintenance work — requires verifying more than just a license. Contractors must typically hold a valid state or local license, maintain surety bonds, carry adequate insurance, and comply with workers' compensation requirements. Skipping any of these verification steps can leave you exposed to financial loss, code violations, and legal liability.

This guide covers what property owners, project managers, and employers need to check when hiring general contractors, and how to maintain compliance throughout a project.

What Licenses to Verify

Contractor licensing is complex because it often involves multiple types of credentials at different levels of government:

• General contractor license. Most states require a general contractor license for projects above a certain dollar threshold. This license demonstrates that the contractor has met education, experience, and examination requirements.
• Specialty trade licenses. If the contractor will perform specific trade work (electrical, plumbing, HVAC), they need the appropriate specialty license in addition to or instead of a general contractor license.
• Local business licenses and registrations. Many cities and counties require separate contractor registrations beyond the state license. Verify compliance with local requirements.
• Surety bond. Most states require contractors to be bonded. The bond protects the project owner if the contractor fails to complete the work or violates the terms of the contract. Verify the bond is active and in the required amount.
• General liability insurance. Verify that the contractor carries general liability insurance with adequate coverage limits. Many project owners and lenders require minimum coverage amounts.
• Workers' compensation insurance. If the contractor has employees, workers' compensation insurance is required in nearly every state. If a contractor's employee is injured on your project without workers' comp coverage, you could be held liable.

How to Verify a Contractor's Credentials

Follow these steps for thorough contractor verification:

1. Request all license and insurance information. Ask the contractor for their license number, bonding company and bond number, and certificates of insurance for general liability and workers' compensation.
2. Verify the contractor license through the state board. Use the state's contractor licensing board website to confirm the license is active, the license type matches the work, and there are no disciplinary actions. Our verification directory links to each state's lookup tool.
3. Verify the surety bond. Contact the bonding company to confirm the bond is active and in the required amount. Some state licensing board websites also display bond information.
4. Verify insurance directly with the insurer. Request certificates of insurance from the contractor's insurance carrier (not just a copy from the contractor). Confirm coverage amounts, policy dates, and that the policies are current.
5. Check for complaints and disciplinary history. Review the licensing board's records for any complaints, violations, or disciplinary actions. Many state boards also publish information about unresolved consumer complaints.
6. Verify local registrations. Check with the city or county where the work will be performed to confirm any required local registrations are in place.

Red Flags to Watch For

These warning signs should give you pause when evaluating a contractor:

• No license or expired license. This is the most basic red flag. A contractor who cannot provide a valid license number should not be hired for work that requires one.
• No insurance or lapsed coverage. A contractor without current insurance leaves you exposed to liability for injuries and property damage on your project.
• Unwilling to pull permits. A contractor who suggests working without building permits is putting you at risk for code violations, failed inspections, and problems when you try to sell or insure the property.
• History of consumer complaints. While a single complaint may not be disqualifying, a pattern of complaints about quality, timeliness, or financial issues is a significant warning.
• Requests full payment upfront. While a reasonable deposit is normal, requesting full payment before work begins is a common practice among unlicensed or unscrupulous contractors.
• License does not match the scope of work. A contractor with a residential license may not be authorized to perform commercial work, or a handyman may not be licensed for work above the exemption threshold.

Ongoing Compliance

For long-term projects or ongoing contractor relationships, maintain compliance throughout the engagement:

• Re-verify licenses and insurance annually. Contractor licenses and insurance policies renew on their own schedules. For ongoing relationships, re-verify at least annually.
• Require updated certificates of insurance. Ask contractors to provide updated COIs whenever their policies renew, and set reminders to follow up if certificates are not received.
• Monitor subcontractors. General contractors often hire subcontractors. Your contract should require the general contractor to verify that all subcontractors are properly licensed and insured. Request documentation for key subcontractors.
• Verify permits are obtained. Confirm that the contractor has pulled the necessary building permits before work begins and that inspections are scheduled and passed as required.
• Keep records. Maintain a file with all license verifications, insurance certificates, bond information, permits, and inspection results for each project. These records are essential for disputes, insurance claims, and property sales.

State-Specific Considerations

Contractor licensing varies dramatically across states:

• Some states have comprehensive statewide contractor licensing (California, Florida, Arizona). Others have minimal or no state-level contractor licensing, leaving regulation to cities and counties.
• Dollar thresholds for requiring a license vary widely — from a few hundred dollars in some states to tens of thousands in others.
• Bond amounts differ significantly by state and license class. Some states require bonds of $10,000 or less; others require $100,000 or more for certain license categories.
• There is no national contractor license compact. Each state license is independent, and reciprocity between states is limited.

For state-by-state contractor licensing details, visit our general contractor licensing guide.

Frequently Asked Questions