Becoming a general contractor can be fulfilling for people passionate about construction and project management. This opportunity allows you to gain a high income, especially if you complete and manage complex construction projects. It will also let you positively impact your community. 

However, succeeding in this industry means going beyond having the right skills and a remarkable track record. You must also obtain the proper licenses and bonds to stay professional and protect your client’s interest. 

This article will discuss why general contractors need a license, the best time to get it, and the types you should purchase. Return for part two of this blog series, where we’ll explain how to acquire these essential documents and how some states do it. 

Why Should You Get a General Contractor’s License?

While not all states will mandate construction contractors to be licensed and insured, some may require registration or local licensing. Obtaining a license for your business can attract clients and show competency. You must also need insurance and bonding because they provide financial protection, and some jobs may require them. 

When Should You Acquire a General Contractor Business License?

Before accepting a job, you may need a general contractor license from the state licensing board or local government. The requirement varies depending on the location, type of work, and project size. However, you may need a license to handle specialized tasks like plumbing, roofing, electrical, or HVAC servicing. 

General Contractor vs. Unlicensed Handyperson: What’s the Difference?

These workers differ in their expertise and licensing for larger projects. General contractors manage construction projects from beginning to end, including acquiring permits, hiring subcontractors, and following building codes. 

On the other hand, handypersons have their tools but may lack the required knowledge or license for complex projects. Handypersons are ideal for small tasks like repairing roofs or fixing doors, while general contractors are necessary for larger projects such as home expansions. 

7 Types of Insurance and Bonds to Consider 

Different states have specific insurance and surety bond regulations. While obtaining the necessary coverage in your area is essential, you should still explore other options. Here are some insurance and bonds general contractors must consider. 

1. Surety Bonds

Although surety bonds aren’t mandatory in all states, you usually need them for jobs involving government contracts. These essential documents guarantee compliance with laws and regulations and the fulfillment of contract terms.

2. General Liability Insurance 

Construction projects always carry a possibility of harm to visitors or damage to clients’ property. Fortunately, you can get financial coverage for these accidents by getting enough general liability insurance.

3. Workers’ Compensation Insurance

In many states, people in the construction industry must have workers’ compensation insurance, even without employees. It pays medical expenses and lost wages for employees who get sick or injured on the job.

4. Professional Liability Insurance

Errors and omissions insurance (E&O) or professional liability insurance covers the expenses associated with legal action if a client files a lawsuit against you for a construction delay or defect.

5. Builders’ Risk Insurance

This insurance covers any damage caused by fire, vandalism, or weather conditions to a building under construction.

6. Commercial Auto Insurance 

You need commercial auto insurance if your company has vehicles. However, if you rent them or your employees use their cars for business, you must have hired and non-owned auto insurance.

7. Contractor’s Tools and Equipment Insurance

Replacing lost, stolen, or damaged tools and equipment can be costly. For this reason, many general contractors get contractor’s tools and equipment insurance. 

Becoming a Successful General Contractor

Pursuing a career in the construction industry can be rewarding, but it always has many dangers lurking. You can protect your business and stay professional by understanding why you need general contractor licenses and bonds and getting the proper coverage. Stay tuned for part two, where we’ll teach you how to acquire these essential documents and how some states do it.

If you’re in Alabama and need a licensing board for general contractors, consult Pascal Burke Insurance Brokerage Inc.! Our professional brokers help businesses across the United States to get the right coverage for their needs. Call us now at 877-893-7629 for a fast quote!