Insurance Is a Must

This is the bottom line: You want your contractor to be fully insured. Proof of insurance usually is a requirement for a contractor to obtain a license. Insurance protects you if there’s an accident or damage during the course of the work. In addition to a general liability policy, contractors must cover their employees with government-mandated policies such as workers’ compensation.

The need for contractor’s bond (surety bond)

A contractor’s bond (surety bond) is required in many states before a contractor will be issued a license to operate. The bond helps guarantee that a contractor will perform according to the terms of a contract. I suppose it’s not much different in principle from a jail bond, which is an attempt to guarantee a defendant’s appearance in court, but with a more wholesome connotation.
A bond is registered with a governing authority in one of two ways:

• The contractor can establish a special account with a cash deposit equivalent to the amount of the bond.
• A bonding company can be engaged for a fee. The amount of the bond varies from state to state. In Washington, for example, the bonding rates are relatively low. A general contractor only has to post a $6,000 bond, and a specialty contractor or subcontractor (electricians, plumbers, painters, and so on) must post only a $4,000 bond. If you are not satisfied with a contractor’s work, you can put in a claim against the bond, although you’re limited to its dollar amount. This isn’t much consolation if all you can collect is a fraction of the value of the work, and you must pursue additional financial relief through the courts or arbitration.

Any claim against a contractor must be legitimate. You have to prove that the work was not done to the specifications agreed to in your contract. Just as a bond gives you some leverage in the event of faulty work, a lien (sounds like “lean,” appropriately enough) gives a contractor some protection against a customer’s spurious claims. Sometimes called a mechanic’s lien, this handy piece of legal work enables a contractor to file a claim against your home until your debt is paid. This doesn’t mean your contractor is going to take up residence in your spare bedroom if you don’t pay, but the lien must be satisfied before the property can be sold. In some cases, a forced sale of the property can occur.

Electrical License and Bonding

Unless you live buried away in the extreme northeast corner of Montana in an area so remote that no one, not even the IRS or junk mailers, knows it exists, you should expect an electrician to be licensed, bonded, and insured in accordance with local and state laws. These requirements are fairly standard across the country. They protect you and the contractor from each other if problems arise. A license is simply permission from a governing authority to do a specific business. It shows that a contractor is registered, often with both the city and the state, and has met certain standards. This enables a contractor to hang a shingle out and say, “I’m an electrician.” It also means the local government has collected a registration fee and will be collecting taxes from the licensee.
Two requirements usually have to be met before a contractor’s license is issued:

• The individual must be bonded.
• The business must be insured.

Contracting for Electrical Contractor

If you skim the Yellow Pages, you’ll find lots of listings for electrical contractors, but that’s not the best way to choose one for your job. You probably didn’t find your physician, dentist, or auto mechanic this way, so why choose an electrician blindly? Do what you did with all the other professionals in your life—get some referrals.
Start with other homeowners. They will be your most obvious resource, particularly if they’ve done any remodeling. Ask your friends, family, co-workers, even your dentist! There is no guarantee that a contractor will give you the same results in your home, but there’s a good chance you’ll be satisfied with the results of a referral. Most small contractors survive on referrals and will want yours as well.
A contractor’s time is valuable, so don’t call a dozen of them to give you a price for adding one circuit to your house. A larger job (such as a service change or a total rewire) is another matter, and three or four bids would not be inappropriate. First, however, there are a few legalities to consider.

Choosing a good electrician

Few homeowners do all the necessary electrical work on an old house. Upgrading a service, tying into old circuits, and rewiring existing ceiling lights can be intimidating tasks. Even if you choose to do more limited electrical work and hire the rest out, a good working knowledge of electricity and your home’s electrical system will enable you to discuss the job intelligently with your electrician and to compare bids more critically.
When you hire a contractor, you each have your respective responsibilities and expectations. You need to clearly communicate what you want done and the time frame in which it must be completed. The contractor must be equally clear in stating the work as he or she understands it from your plans, the cost for labor and materials, and a reasonable completion date. Any changes by either party must be negotiated.
This might be a new experience for you. You’ll find this stranger and perhaps a crew of one or two people wandering around your house in work boots, punching holes in the walls, and shutting your power off from time to time. Who are these people and how do you deal with them? Suddenly you’re an employer of sorts, hoping these new employees are going to work out before you write them a check. You and your contractor should have the same goal: an efficient job done as agreed to in advance with a minimum of disruption. Don’t worry, clear communications with a carefully selected electrician—and maybe a box of doughnuts in the morning—will smooth the way for everyone involved.