Licensed, bonded and insured: what it really means for your renovation

Picture this. A homeowner hires the lowest quote, a pipe is nicked behind a freshly closed wall, and the water shows up in the dining room two weeks later. The contractor does not answer the phone anymore. The homeowner finds out, too late, that nobody was insured, and the repair is now their own bill.

We are engineers by training, so we tend to look at renovation as risk management. Most of what goes wrong on a job is not bad workmanship. It is a gap in who is responsible when something does go wrong. These three words are how people try to close that gap, so let us take them one at a time.

What does "licensed" mean for a contractor in Ontario?

This one surprises people. Ontario does not have a single licence for general contractors the way some US states do. What you will find instead:

• Licensed trades. Electrical work must be done by an electrical contractor licensed through the Electrical Safety Authority (ESA). Gas work is regulated through TSSA, and plumbing is a certified trade.
• Municipal rules. Cities regulate permits and inspections, and some require business licences for certain trades.
• Registrations and clearances. WSIB registration and a business registration are the practical proof that a company is operating properly.

So when a contractor says "licensed," ask which licence, and for what. A good answer names the trade and the body that issued it.

What is commercial general liability insurance, and why does the amount matter?

Commercial general liability (CGL) covers damage and injury that a contractor's work causes to other people's property or to third parties. If a crew floods your kitchen or a ladder dents your neighbour's car, this is the policy that responds. It is not decoration. Ask for the number, because a thin policy can run out quickly on a real loss. We carry $2 million in liability coverage, and certificates are available on request.

Two details are worth asking about. First, whether the certificate is current, since a policy can lapse. Second, whether you can be named as an additional insured or at least given a certificate holder copy for the job. A reputable contractor will not blink at either.

Why does WSIB matter to a homeowner?

WSIB is Ontario's workplace injury insurance. Construction companies are generally required to be registered and in good standing, and the proof is a clearance certificate. If a worker is hurt on your property and the contractor is not covered, you can be pulled into a dispute you never signed up for, and it is worth asking WSIB or your own home insurer how that would play out for you.

The good news is that checking is free. WSIB has an online tool to verify a clearance certificate, and it takes a couple of minutes with the company's name or account number.

What does "bonded" mean, and do you need it?

A bond is a guarantee from a surety company that a contractor will perform the contract, or that the surety will step in financially if they do not. It is common on public and larger commercial projects, where owners often require it. It is much less common on residential renovations, and a contractor who says "bonded" about a home job should be able to name the surety and show the document.

For a home renovation, the protection that matters more is how you pay. A payment schedule that never gets ahead of the work done on site limits what you can lose if something goes wrong. We cover that in our guide to fair renovation payment schedules. If you are running a commercial project and need a bonding arrangement, tell us up front and we will give you a straight answer on what is possible.

How do you verify a contractor in ten minutes?

1. Ask for the Certificate of Insurance. Check the policy dates, the liability amount, and that the company name matches the one on your contract.
2. Verify WSIB. Use WSIB's online clearance verification, or ask for the clearance certificate and confirm it.
3. Ask about trade licences. Electrical work should come with an ESA-licensed contractor and a permit or notification where required.
4. Check the company is real. A street address, a working phone number, reviews on more than one platform, and a written contract.
5. Put it in the contract. Insurance and WSIB status should be written in, not promised.

Our guide to choosing a general contractor in Hamilton has the longer checklist.

Keep reading

• How to choose a general contractor in Hamilton
• Protecting your capital: what a fair renovation payment schedule looks like
• Beyond the handshake: reading the fine print on workmanship warranties

Sources

• WSIB: Verify a clearance certificate
• Electrical Safety Authority: Hiring a licensed electrical contractor

This guide is general information from a contractor, not legal advice. Rules, prices and ranges change, so confirm current details before you sign a contract.