What Happens if You Hire Unlicensed Contractors?

Licensing exists to provide the public and more specifically your clients peace of mind. Construction projects involve planning for the future safety of everyone who winds up using the building after the work is done, and unlicensed individuals simply have not demonstrated the skills and judgment needed for the public to have that confidence. That’s why bond and insurance programs do not cover liability incurred through the decision to use unlicensed subcontractors on your projects. As a result, working with unlicensed contractors could potentially cost you your business if things go wrong.

Licensing & Shared Liability

One of the reasons licensing bonds are so popular in the construction industry is because they cover your license and credentials. In the event those credentials lapse and there is a project shutdown, they pay out to cover client damages. If you are found to be misrepresenting yourself, they pay out, at your expense as the one who bought the bond. They do not always pay out if your subcontractor turns out to be unlicensed, though. In those cases, you could wind up sharing liability with an amateur whose finances make them basically judgment-proof, leaving you on the hook for damages.

Insulating Against Licensing Issues

Protecting yourself from that eventuality means buying the coverage that takes care of you the way your bonds take care of your clients. Even then, knowingly working with unlicensed contractors still voids the bond because it is there to protect you from mistakes, not cover intentionally risky behavior.