At a minimum, the contractor should have workers' compensation insurance so you're not financially liable if a worker is injured while on the job. To verify, ask to see a copy of the contractor's certificate of insurance or the name of their insurance carrier.
Although it's not typically required, Lopes says the CCSLB recommends people hire contractors with general liability insurance, which covers damage they might do to your property, such as backing a truck into your garage.
Put everything in writing. Knowing exactly what the contract should include will help you avoid problems down the road. Some obvious things: the start and end date, what materials will be used, the warranty, who the subcontractors are, and the budget. Granted, the budget may change somewhere along the way because you realize you want something else done or for reasons outside your or the contractor's control, like the cost of a material rising. However, if that happens, a change order must be signed, in which both parties agree to the alteration.
The contract dictates the payment schedule, which is often divided into three categories: the down payment, progress payments, and the final payment. The down payment will likely be anywhere from 5 to 10 percent of the job. Lopes says contractors who ask for significantly more than that are trying to "frontload" the contract, meaning they're asking for a lump sum even though they haven't started any work.
Progress payments are payments made throughout the project as certain parts are completed. For example, if you're remodeling the kitchen, you might pay 25 percent once the flooring is finished, 25 percent after the appliances are installed, and 25 percent when finishings like the countertop and lighting are completed. You may want to write in penalties if parts aren't completed on time, but a good contractor may not agree to that.
The final payment is typically 15 percent and is made once you've thoroughly checked over the space and feel every part of the contract has been satisfied.
One important thing many people forget to include is the protocol for lien wavers. If the contractor doesn't pay his subcontractors, they can legally come after you for the money—meaning you would have to pay twice, since you would have already paid the contractor. To prevent this, the contract needs to require the general contractor to produce lien waivers throughout the process, confirming that both the general contractor and its subcontractors have been paid.
The bottom line. Finding a reliable contractor is the first step, but you'll need good communication throughout the project to ensure everything runs smoothly. Says contractor Roskowinski: "Successful projects are really about the dialogue between the homeowner and the contractor."