What it means to be Bonded, Licensed, and Insured

Service companies and contractors usually mention that they are “bonded, licensed, and insured” when they advertise their services. Many customers often read these terms but most often than not, they do not know exactly what they mean or may interchange one for another.

When companies claim that they are bonded, licensed, and insured, it tells us that they are committed to giving their best and most valuable service to their customers. These are minimum requirements that service companies should meet, so if a certain company does not comply, it puts its credibility into question.

As customers, it is important to know whether a company is bonded, licensed, or insured. For instance, it is part of the list that the homeowner should keep in mind before hiring a home contractor. What does it take to be bonded, licensed, or insured? Here is a complete explanation on each one.

Insured

A company is insured when they have coverage just in case of accidents or any other untoward incidents on the job. The insurance usually covers the damage up to the amount of the coverage limit.

There are several types of insurance coverage that companies can avail of. General liability insurance protects the company against lawsuits and usually covers bodily injury, personal injury, and property damage. Generally, liability insurance includes coverage just in case someone gets hurt or injured on the job.

It is also important for independent home contractors to show their clients proof of coverage. For instance, contractors insurance at next-insurance.com covers general liability for contractors such as handymen, HVAC technicians, carpenters, electricians, landscapers, janitors, drywall installers and concrete workers.


The type of insurance that a company gets depends on their type of business. Most businesses usually have property insurance, workers’ compensation insurance and commercial auto insurance.

Bonded

When a company is bonded, it means that a separate entity has secured money that a customer can claim in the event that they need to file a claim against the company. A bond will also protect the client because it pays them in case of poor or negligent performance of the service. This covers incomplete and sub-standard work. It also protects the customer when the company or contractor fails to meet other financial obligations, like paying sub-contractors or materials. The secured money is independently managed and it is not controlled by the company. In other words, a bond is an amount of money that is set aside just in case something happens.

Businesses usually apply for either a commercial, contract, or court bond. Once approved, they sign an indemnity agreement and pay the premium. When a company is bonded, it tells customers that it is well-funded just in case any untoward incident occurs.

Licensed

Each U.S. state requires certain professions and businesses to be licensed before they operate. Federal licenses and permits are also needed for certain businesses. This is especially applicable to industries that have something to do with transportation and logistics, fish and wildlife, radio and television broadcasting, alcoholic beverages and other industries that could threaten life or may have consequences on a nationwide scale if not properly operated.


Certain professions require a license in order to conduct business and perform a certain type of work in a certain state or locality. There are regulated professions that need to meet legal requirements. These professions include dentistry, accounting, cosmetology, residential painting, and others. A license is necessary in order to show the service provider’s competence. You can check the performance history of any professional through the Better Business Bureau. All you need is their license number.

Customers should do due diligence and check if the company or contractor that they plan to hire are licensed, bonded, and insured.

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