Are You Licensed?
What are the risks? Generally, contractors without licenses don't have them for a reason, which is a huge red flag. Licensing requires passing written tests on codes and building practices, experience requirements, and many other aspects that prove you are competent at what you are doing. If somebody isn't licensed, there is probably a really bad reason why not.
Do You Carry General Liability Insurance?
If anything happens to your home while they are working in it, there will be no insurance company to pay for the damages.
Do You Carry Workers Compensation Insurance?
What are the risks? Basically, if anyone gets hurt while working on your home and they aren't covered by having workers comprehensive insurance coverage, you will be responsible by law for their medical treatments, which can be as simple as a few thousand dollars for a minor injury to hundreds of thousands for a major one.
Bottom line - It is always safer to deal with a fully licensed and insured contractor!!