What Does "Licensed, Bonded, and Insured" Mean, Anyways?

It can be intimidating to start a new home project. If you've tried to DIY, you'll know that the language of construction itself can be a big barrier to overcome. When you finally decide to bring in a professional contractor, how do you choose the right one?

It usually all comes down to a couple of factors, trust and cost. These two variables actually have a lot to do with each other! You may have seen contractors boast on their websites or vans that they're "Licensed, Bonded, and Insured", but what does this mean, really?

Depending on the trade, it can vary -- widely.


Licensed at the base level for a contractor in Wisconsin means that they have passed and paid for state licensure. For fence builders and installers, like ourselves, this mean that we hold a Dwelling Contractor Qualifier License (DCQ) as well as a Dwelling Contractor License (DC). The Contractor Qualifier License must be renewed every two years, and it's paperwork must be submitted with continuing education. Some big requirements of the Dwelling Contractor License requirements include holding a valid DCQ, a business EIN, and proof of financial responsibility (General Liability Insurance). The Dwelling Contractor License must be renewed every year. In addition to this, there's a whole litany of possible licensing that a contractor might need depending on the municipality, that can include a Home Improvement License among others. Your contractor must have a valid license to pull a permit for your project!


Being bonded means that if a contractor fails to adhere to their contract and leaves a job unfinished, the client (or homeowner) can get reimbursed to pay for another contractor to finish the job from the Bonding Agency. Being bonded is a service paid for by the business owner to provide more peace of mind to clients. To be fully bonded, the business must hold a Surety Bond that can cover the cost of any project it undertakes. Typically that would mean at least a $25,000.00 bond which would cost a company around $250 a year to maintain. A business can, however, hold a bond for whatever value they deem appropriate.


Now finally, we'll touch on being fully insured. Being fully insured can be different things to different people. At a minimum, the State of Wisconsin required that a business either hold a $250,000 insurance policy or a $25,000 bond. But this is just for the business itself. On top of that policy or bond, the business owner might need insurance on their tools and shop space. There are many types of insurances that must be maintained on a regular basis for a company such as ours to be compliant. Some of these include Unemployment insurance, Workers Compensation, and if it's offered to its employees, Health Insurance. Chisel and Vine holds a $2 million general liability policy in addition to being bonded.


And just so you know, it is totally reasonable to ask a business for their COI (Certificate of Insurance) for proof of responsibility. If a business says it's licensed, bonded, and insured, it is a requirement that they are able to provide proof of these items to clients. If you want a bit more peace of mind, you can trust a contractor who has all three of these assurances -- just remember, their cost might be a bit higher upfront than someone who is uninsured, not bonded, and unlicensed, but it pays off!









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