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December 15, 2022

Prevent Costs With Contractor Insurance Verification


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Business insurance is an important part of a property and casualty insurance agent's portfolio. In the construction industry, contractors are faced with significant liability on each job. For this reason, contractors carry different types of insurance to protect themselves against liability risks associated with building materials or craftsmanship on the jobs they complete.

Business owners often require professional contractors to provide proof of insurance before starting a job. If a contractor doesn't already have the required insurance policy, they’ll need to purchase coverage quickly to be eligible to bid on a job.

An insurance agent who uses agency best practices can promptly provide quotes, coverage, and proof of insurance. They are more likely to enroll a new business customer as well. When agents use software to provide accurate quotes and contractor insurance verification, they can speed up the process and improve customer experience.

What Is Contractor Insurance?

Contractor insurance is usually a package of policies that protect contractors against lawsuits, on-the-job injuries, and damage to equipment. License requirements vary by state, county, and sometimes municipality. Typically, contractors need liability, workman's compensation, and inland marine insurance.

Why Is Contractor Insurance Verification Important?

All property owners are responsible for accidents that occur on their property unless they have protections (like signs and liability waivers) in place to release them from responsibility. Building projects can create unexpected risks that make accidents more likely.

For this reason, contractors must have adequate insurance to cover these risks. Without contractor insurance verification, a property owner could be left paying out of pocket if an accident occurs.

The Importance of Insurance

Typical homeowners' or business owners' insurance policies generally exclude accidents related to construction. Since construction is a voluntary service the property owner sources, insurance policies consider related damages as intentional services.

Without the proper insurance in place, a property owner could be held liable for costs related to injured contractors or subcontractors, damaged equipment, and even damages to their own property. This is why property owners need to hire contractors who are adequately insured. Do you have the right insurance coverage to protect youself from being liable if the unexpected were to happen?

Prevent Unexpected Costs

Any type of construction has the potential to result in unintentional damage. If a contractor has adequate insurance, such damages are an inconvenience. Without insurance, those damages can result in expensive repair bills and ongoing litigation.

Why Verification of Insurance Is Important

Insurance verification provides a business property owner with proof that a contractor has the insurance coverage they claim to have. To secure a job, a contractor should agree that they have adequate coverage or the clause may be simply overlooked in a contract. By verifying that a contractor's insurance coverage is sufficient to meet state and local regulations and specific requirements for a job, the property owner is better protected against potential risks.

Breakdown of Contract Licensing Terminology

General contractors oversee building projects from start to finish, but not every handyperson working with their own tools is a licensed contractor. The terms licensed, bonded, and insured are commonly used to describe professional construction companies. However, these terms aren't always accurately used and could be deceptive when misused.

Clearly defining standard contract terms can help business property owners request proper credentials from contractors. It can also help insurance agents provide adequate coverage for business clients.


There are two types of contract licenses: Certified and registered. A certified contractor can work anywhere within the state they're licensed.

A registered contractor has not completed a state exam and is required to register in each city or county where they want to work. They must meet state requirements for insurance and fingerprinting.


A contractor who is bonded has purchased a surety bond to guarantee legal and financial obligations. A surety bond describes the conditions of legal and ethical conduct for a contractor.

If the contractor's client believes the contractor has violated the bond's terms, they can file a claim against the bond. That’s if they can't obtain compensation for damages or injuries from the contractor.

Some insurance agents sell surety bonds along with other insurance products for businesses.


An insured contractor has purchased insurance products to protect against the risks of performing construction and maintenance work. However, the term insured doesn't describe a contractor's specific insurance coverage. This is why a property owner needs to seek insurance verification.


The term licensed contractor generally refers to a certified contractor who has passed a state exam and is licensed to work anywhere within the state. Certified contractors adhere to fingerprinting requirements and maintain certain levels of insurance to maintain their certification.

It's important to note that a registered contractor may also use the term licensed although they haven't taken a state exam.


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How Do You Check if a Contractor Is Licensed and Insured?

Licensing requirements exist to cut down on contractor fraud and ensure contractors have a certain level of knowledge and are prepared to accept legal and ethical requirements related to completing construction work. Insurance and bonding ensure that contractors are covered to take care of certain financial requirements related to unexpected risks. Many customers will be interested in making sure contractors are licensed and insured.

Check State Laws

License requirements vary by state, so it's important not to assume that any type of license is sufficient. Check state laws to determine which licenses contractors working in the state must have. Take your research a little further and call your local building department to learn local license requirements for contractors.

Ask to See Their Certificate of Insurance (COI)

A certificate of insurance (COI) is a document provided by a contractor's insurer or insurance broker that outlines the policies held by the contractor and the valid dates. A COI contains valuable information including the types of policies, liability limits, effective dates, policy numbers, and the certificate holder's name. A contractor should be able to access this document quickly through their insurance agent if they don't already have it on hand.

Verify the Contractor's Business Location and Telephone Number

Construction fraud is common. Unfortunately, when a property owner recognizes a construction scam, the offending party is often long gone.

By ensuring your contractor has a current address and telephone number, you can verify the legitimacy of the business. This address and telephone number should also correspond with any other information you gather about the contractor, like proof of license and insurance.

How Do I Check My Liability Insurance?

Before beginning a construction project, it's important to consider insurance coverage and the consequences of inadequate liability coverage. When a property owner wants to check coverage before hiring a contractor or a contractor wants to ensure adequate coverage before bidding on a project, the first place to seek information is the insurance declaration page.

A dec page summarizes what is in an insurance policy. It includes what is and is not covered, the name of the insurance company, and other essential details of an insurance policy, including:

  • The name and address of the insured
  • The policy number
  • Coverage period dates
  • Identification and location of the property insured
  • Types of coverage (like liability) and their limits
  • Policy deductibles
  • Endorsements or riders to the policy

Since dec pages contain so much vital information about current coverage, they could also be used by a contractor as proof of insurance.

Dec pages are typically received by a property owner or contractor when a policy is purchased or renewed. Often, this means they're easily misplaced and not readily available when needed. A highly qualified insurance agent is prepared to access this critical information for clients quickly and efficiently.

The Right Software Can Help Insurance Agents Supply Contractor Insurance Verification

Any contractor hoping to bid on a lucrative project needs immediate access to important insurance documents on demand. Insurance agents and brokers who use modern insurance technology can supply this information quickly. It’ll improve the quality of service for business insurance customers and property owners seeking construction services.

InsurGrid is a type of insurance agency software that gives agents a personalized platform to collect client policy data with dec pages instantly. Dec pages offer vital information when a contractor needs to obtain proof of insurance or a quote to purchase the coverage necessary to bid on a project.

By accessing this information quickly, an insurance agent improves the customer experience for business clients who frequently require proof of insurance. Learn more about how InsurGrid can help you improve your close rate and customer satisfaction.