The Paperwork That Protects Your HOA: Insurance, Licensing, and the Truth About Bonds
We've spent a lot of time in this series on choosing the right contractor — leveling bids, scoring intangibles, and avoiding the risk traps before you sign. But there's a quiet layer of paperwork that sits underneath all of it. Get it right and you'll likely never think about it again. Get it wrong and it's the thing that surfaces the day something goes sideways.
Here's what your board should actually be asking for before a contractor sets foot on your property.
Insurance: Don't Just Collect the Certificate — Read It
Almost every contractor will hand you a Certificate of Insurance (COI) without blinking. The mistake boards make is treating that piece of paper as proof they're protected. It isn't. A COI tells you a policy exists — it doesn't automatically extend any of that protection to your association.
Two things turn that certificate into real coverage for your HOA:
Additional Insured status. Ask to be named as an additional insured on the contractor's general liability policy. This is what puts the contractor's insurer on the hook to defend your association if a claim arises out of their work. Without it, you're a bystander to their policy.
Waiver of subrogation. This keeps the contractor's insurance company from turning around and coming after the HOA to recover what they paid out. It's a small endorsement that closes a big back door.
Both are routine, both are cheap for the contractor to add, and both should be confirmed in writing before work begins — not promised verbally.
Licensing: Matters More As Projects Get Bigger
Confirming a contractor is properly licensed is always good practice, but I'll be honest about where it really earns its keep: the larger and more complex the project, the more a license matters. On a straightforward repaint or a small repair, a reputable local contractor with strong references may carry you a long way. On a multi-phase, high-dollar, long-duration capital project — building envelope work, structural repairs, large reconstruction — proper licensing becomes a genuine gate, because those jobs carry the kind of liability and code exposure where being unlicensed isn't a technicality, it's a real problem. Scale your scrutiny to the size of the job.
Bonds: Cut Through the Confusion
There are several kinds of bonds in construction, and the jargon scares boards off. For an HOA, only one is really worth understanding: the performance bond.
A performance bond is a guarantee, issued by a surety company, that the contractor will complete the work according to the contract. If the contractor defaults — walks off, goes under, fails to finish — the surety steps in to either fund completion or pay the association the cost to get it done. In short, it's a financial backstop against your contractor not finishing the job.
Two things to be clear-eyed about:
It's mainly for complex, long-term projects. For a typical short repair or repaint, a performance bond is overkill. Where it genuinely earns its place is on large, multi-month capital projects where a contractor failing partway through would leave the association in a painful, expensive hole. That's the scenario the bond is designed for.
It is not free. The contractor pays a surety premium to issue the bond — typically a percentage of the contract value — and that cost gets passed straight through to your project. So a performance bond is a real line item, not a freebie. On a large, high-risk job it can be money well spent. On a small one, you're paying for protection you don't need.
The Free Tool Most Boards Never Ask For: A Bondability Letter
Here's the part I wish more boards knew about. Before you ever decide whether to require a bond, you can ask a contractor for a bondability letter — and it usually costs nothing.
A bondability letter is a short statement from a contractor's surety confirming that the surety would be willing to bond them, and often up to what dollar amount. You're not buying a bond. You're simply asking the contractor to demonstrate that a surety company — one that does nothing but underwrite contractors' financial health — has looked at their books and is comfortable backing them.
Why this is so valuable: a surety vets a contractor's financial strength, working capital, and track record far more rigorously than any HOA board ever could. If a contractor can produce a bondability letter for a number at or above your project size, you've just received independent confirmation that they have the financial footing to fund their side of the work and see it through. If they can't produce one, that tells you something too.
It's free, it's easy to request, and it quietly answers one of the hardest questions in vetting: can this contractor actually afford to do my project?
The Bottom Line
Insurance is only protection if your association is named and the back doors are closed. Licensing scrutiny should scale with the size of the job. And on the bond question — reserve the performance bond for your big, complex, long-horizon projects where the cost is justified, but ask every serious contractor on a large job for a bondability letter. It's the cheapest piece of due diligence you'll ever do.
Sean Davis, PMP | Civil Engineer | Current HOA Board Member (12 years) | DHA Construction Management | Broomfield, CO
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