Why License Verification Is Important?

Why is license verification important?

The verification of license and insurance for both homeowners and general contractors is important in that in projects that are going through with multiple subcontractors or even one subcontractor, even in a small plumbing project where a pipe bursts, it can cause other consequential damages that were unforeseen, and much more expensive to rehab and repair. Not knowing and having and making sure that that licensed and insured individual can properly come and repair any of those items, it gives you the peace of mind to know that that person is someone you're willing to work with. Otherwise, you're creating some financial exposure that you might not think you are exposed to.

What are the risks?

The potential liability for a general contractor hiring an unlicensed or a lapsed license or lapsed insurance subcontractor is very real. General contractors that are working with multiple subcontractors can sometimes take their eye off the ball because the relationship has gone so far, that they haven't made sure that that person is still carrying the same license or the same insurance. What could happen in that case is that the general contractor’s general liability or work comp insurance might not step in in the case that one of their subcontractors performed work as an unlicensed contractor, because there will be some sort of exception to their own policy. What that means is that's personal liability to that individual, depending on their corporate structure. So, the real liability - as general contractors should see it and the president and any sole proprietors of those companies should see it - is they’re putting up their assets on the line if they haven't verified whether or not a subcontractor is licensed and insured.

What do you need to know?

A weekly report and automated process to know whether my subcontractors are in good standing in both their insurance and their licenses is invaluable. First, it gives me peace of mind noting that anyone who's working on our sites is in good standing. Second - and almost equally as important - is any of those companies that we're working with for future projects and estimating, knowing that they’re licensed and insured gives me verification for any numbers that I put out that are used as the basis of my own estimating, my own bids, which could be a risk if they go out of good standing. So, at least gives you enough comfort that the numbers that you're putting out to future projects are with subcontractors that are licensed and insured, especially new subcontractors that you're just starting a new relationship with.