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What It Means To Be Bonded, Licensed & Insured

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Bail BondsWhenever a company offers its services, it’s generally quick to note that it’s bonded, licensed, and insured (when it applies and if they are) but I was never certain what that actually meant. Until now, all I knew is that you should only hire someone if they’re bonded, licensed (if applicable) and insured. Often times someone who isn’t will be cheaper, but you will have to accept all of the responsibility if something bad happens and, as Murphy’s Law clearly states – if something bad can happen, it will. (Incidentally, that picture of the bail bonds company is only somewhat related to what it means to be bonded)

Bonded

Being bonded means that a bonding company has secured money that is available to the consumer in the event they file a claim against the company. The secured money is in the control of the state, a bond, and not under the control of the company. Let’s say that you hire a cleaning company and they end up stealing your Nintendo Wii. Well, you would file a claim against the company and, after an investigation, would be paid out by this bond.

This is slightly different but similar to what it means for an employee to be bonded. Being bonded in that case means that a bonding company has investigated your background and finds that you’re trustworthy and “good” enough to insure. In general, this is generally done when an employee has to handle large amounts of money or handle valuable property like jewelry or art. There is a very extensive and deep background check involved and what the employer gets is insurance that you won’t steal. If you do, then the bonding company pays out the amount of the theft. By being bonded, it shows that the employee is trustworthy enough for a bonding company to insure you up to a certain amount. Now, a company that is bonded means that a bonding company has funds

Licensed

For certain professions, a license is necessary to show that you’re competent and permitted to conduct business in the city, municipality, or state in which the license was issued. For example, home improvement contractors will have to be licensed to perform certain types of work and that license number will be printed on every advertisement they print. You can take that license number and look up their performance history in most states through the Better Business Bureau.

Insured

This is probably the most commonly understood of the three (second to being licensed) and this refers to what happens if someone gets hurt on the job. Let’s say a company is fixing your roof and a roofer falls off and hurts him or herself. If the company isn’t insured, then the claim gets filed against your homeowner’s insurance (bad). If the company is insured, then the claim gets filed against the roofing company’s insurance.

In summary, it’s important that anyone you work with is licensed, bonded, and insured. There’s no reason why you should have to work with someone who isn’t all three, unless being licensed doesn’t apply. Once you know that they are, research and confirm that they are being truthful. I can say that I’m bonded, but unless I provide the documentation and you can verify it, I’m not actually bonded.

(Photo: whitetrashtexas)

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97 Responses to “What It Means To Be Bonded, Licensed & Insured”

  1. Marfer says:

    Just a few points to clarify the bonding issue. The three types of bonds are Bail Bonds, Surety Bonds and Fidelity Bonds. Surety bonds are financial guarantees that the licensee will fulfil their legal and licensing obligations, which does not necessarily mean performing the work you want done in the way you want it done. Fidelity bonds are as described above: they guarantee the honesty of an employee.

    You should be aware that it’s not as easy to collect on a surety or fidelity bond as one might think. Simply having a valid claim is not sufficient. In most cases you’ll have to sue and win an award in court. Then you will stand in line with the other creditors/claimants to collect In all likelihood the contractor is already in financial trouble and has other creditors making claims against that $5,000 or $10,000 surety bond. You’ll be lucky to get some payment before the bond is exhausted.

    I agreee that even though your contractor is licensed, bonded and insured, it’s not a substitute for doing your due dilligence research.

  2. Minimum Wage says:

    Sounds like an honest person with bad credit won’t be bondable.

  3. Minimum Wage says:

    Some western states have a state agency which licenses home contractors (basically, any business which works on or in your home, including contractors, pest control, and painters) and the license serves as a clearinghouse to include bonding and insurance. So anyone can look up whether a business has an active license and at the same time know they are bonded and insured.

  4. KMC says:

    Jim, are you positive that, in the event of a worker falling of your roof, only the roofing company’s insurance is on the hook? I don’t have any experience in this and I’m not a lawyer, but it seems to me the worker would also have a claim against the home owner.

    • mckim solar and weatherization says:

      Hi KMC,

      The employee cannot file a suit against a homeowner for falling off of their roof. However, if there was information vital to the health of the crew, the homeowner did not ay anything to the contracted help, and all the crew suffered serious injury or death, then yes! But for slipping off doing the normal routine…no. That is where the employer insurance kicks in. Plus workman’s comp.

      Also, you have to check the state guidelines. They all have different guidlines:)

    • steve says:

      Workers compensation prevents a employee from sueing a home owner, business insurance covers property damage, bonding covers claims against theft.

  5. B says:

    i have a question if i want to do services and it is just me how can i get bonded and who do i talk to. I would like to have more information for future references. I do understand company’s bond their employees but when it comes to someone who is self employed and have no employees how do a person get bonded for security purposes.

    • Joe says:

      Hi.. Im in the same boat and am looking for the same answers to your questions. I would greately appreciate any help you may find pertaining to the subject matter. Thanks….

    • Jerry Brew says:

      What if you have a felony that’s 28 yeas old, can you get bonded?

  6. steven guzman says:

    I was hired for three days then the bank told me I was not going to be able to continue employment due to them not being able to issue a bond for me. I had a misdemeanor 12 years ago. Are there any companies out there I can work for? Banks. Do the same rules apply to NCUA?

  7. jane says:

    What is the cost of being licensced, bonded and insured?

  8. Marge says:

    As an owner in a 189 unit condominium, I was asked to help our social committee by collecting the fees for our social functions (i.e. October fest, Christmas Party, etc.). Usually, we have about 65 people attending these during these social get-together and ask for $5.00 each to help defray the expenses. We provide all the food and dessert coffee and tea but not any alcohol. The treasurer of the Board of Directors, who attends all the condominium socials, raised the question: Was I bonded? I am not sure whether he was just joking. But it seems at each function he makes a similar remark. Immediately after each functions, I submit a detail financial report to the Social Committee chairperson. I would think that the Social Committee Chair would be more responsible to submit my report on to another authority if required? As a unit owner and member of the social committee, I never heard of such a requirement? Do I have to be bonded? Look forawrd to your response! Marge 12/7/2008 10:16 am

  9. jim says:

    @Marge: I doubt there’s a requirement to be bonded. He was likely asking just in case something happened to the money. Since he mentioned it more than once, he probably wasn’t joking but this seems ridiculous. As the owner of a unit in the condo complex, it seems absurd that you’d run away with $300 for any reason.

  10. Susan says:

    I am wanting to start a Non-Medical Companion Care Company in the area in which I live. At first it will just be myself and maybe 2 girl friends of mine that I know are honest people and are cmpletly trusworthy. I am not able to get any loan to use for start up cash. The types of services that will be offered are light housekeeping, shopping or taking the elderly to the store to pick up items they may need. Laundry services, thingds of this nature. I was wondering do I need to be bonded? How would I go about getting myself bonded and what would the cost be? Surety Bonds and Fidelity Bonds. Which would pertain to my situation. Do I need special insurance coverage on my van to provide rides to my clients, say if I take them to a Dr’s appointment or to get their hair done? Thanks in advance for the information.

    • Evelyn says:

      Did you ever get an answer?

    • Kim says:

      Hi Susan,
      i noticed your question here and I am interested in starting up the same type of company. Did you ever get a response? Have you done any more research and what have you learned? I would greatly appreciate your input. thanks Susan.

      • Melora says:

        Hi Kim, I just responded to Susan – but, I see you two posted almost a year ago! How is your business going, as I am in the beginning of wanting to do the same – any insights as to the lic., bonding, INS. Question? Thank you!

    • Melora says:

      Hello Susan, I am in the same boat, did you ever get an answer for this? I would greatly appreciate any words of wisdom you have – how is it going? I am in central Florida -how ’bout you? Thank you, melora

      • Johnette says:

        What part of Central Florida are you in? I am located in Clermont Fl. I have also been wanting to start my own business doing companion care. I am just now looking in to getting bonded and insured. I have insurance through my husband and am wondering if that is enough or if I need business insurance. I plan to renew my CPR & First Aid plus have a current background check available. However maybe the bonding part would cover a background check so that may be an added cost? Have you found the information you were seeking? I would love to hear what you have found out. I am a stay@ home mom looking for a fulfilling career with flexible hours.

    • Kim says:

      I am currently doing the same as Susan. I’m also considering an expansion of services to help people with moving. I do not have employees, yet, but may in the future. I am would be grateful for any further information, as well. Thank you.

  11. Robert Weiss says:

    How do I go about bonding my fledgling moving company? Licensing and insurance are the easy part. The moving jobs my crew and I have accomplished have been flawless, i.e., no incidents or accidents. However, our business needs bonding to cover us and to attract more business. Our good reputation is great, but licensing, bonding, and insurance is so important.

  12. hopeful200856 says:

    Can I get bonded for a job if I have a misdemeanor that is 12 years old?

  13. G Interstate says:

    Where or what company(ies) is a good one to get “Bonded License and Insured” for a construction project manager? Any ideas on the approx. cost with a clean background?

  14. David says:

    I’d like to point out something important Jim did not mention out in his posting. Being insured and taking yearly continuing ed classes are the only two requirements (at least in Minnesota) for maintaining a contractor’s license. Being bonded is not. Also, insurance is primarily for DAMAGE done to the homeowner’s (or neighbor’s) property, not personal injury (that’s health insurance, if he can afford it). For instance, say a contractor is backing up his pick-up to drop off materials. He hits some scaffoding which falls over, breaking an antique stained-glass window in his client’s home. In the process, the scaffolding also knocks over a ladder which falls on a neighbor’s car, causing dents and scratches. That’s what his liability insurance is for.

  15. Anonymous says:

    How can you verify if a company or person is bonded?

  16. de says:

    I am wanting to start a House Showing Company in the area in which I live. At first it will just be myself and 4 other friends of mine.I’m not able to get any loan to use for start up cash. The services that I will be offered are,showing the properties to people who work early/late or odd hours,weekday mornings/nights,late nights and weekends,hoildays ect…we would also bring refreshment and make sure the the real estate agency is fully reconginzed we are not real estate agency and wish not to be we just have a love for showing properties.I was wondering do I need to be bonded? How would I go about getting myself bonded and what would the cost be? Surety Bonds and Fidelity Bonds. Which would pertain to my situation.Thanks in advance for the information.

  17. Linda says:

    I would like to hire a cleaning person on a contract basis. They are not insured because they are not companies. What recourse do I have so that I am not liable for any incidences that may occur while they are cleaning my home? i.e. if they sue me for an incident, is there insurance for this?

    If not, how can I get insurance to cover this?
    thanks

  18. Steve says:

    I am thinking about starting a carpet cleaning business. The Insurance and Licensing is not a problem but over the last year or so my credit has taken a beating. Will this keep me from getting bonded?

    • Marilyn says:

      Hi Melora, I am trying to do the same thing that you ar Georgia. Did you ever get a response?

  19. james says:

    i am getting ready to start up a auto trans port business within the next 2 months and i want to know how much will the bond and insurance is going to cost?

  20. madeline says:

    i need information about being bonded,for criminal charges,for employment,what does a person have to do,to be bonded,and how would someone go about doing so

  21. nclady says:

    How far are they allowed to check into your credit? Something’s just aren’t everyone’s business. I understand the background check completely, but your credit is your personal business.

  22. Awesome info! I am in the process of opening a service orientated business and I was needing to know what insurance and bonding I needed. Now I see I need to get all three.

    Thanks :)

  23. Lee M. Darden says:

    I am on a pre trial intervention program that ends 12/10/2010. I would like to get myself bonded NOW so I can get a job. What companies can I go to to get bonded? Please Reply ASAP!!!

  24. Denise Cook says:

    Interested in starting my own nonmedical home service business such as cleaning, cooking, running errands, taking to dr. appt. etc, how do I get bonded and insured and how expensive is it? In the beginning it will just be myself in the business.

    • Pat Chaffin says:

      I’m asking about being bonded etc. I have no idea. What kind of a website are you ? I need answers not questions. any siggestions as to who may have answera>

    • Mari says:

      did you ever get an answer if so will you let me know what it is you found out… Thanks

  25. jackie taylor says:

    I paid an electrician $4000 towards his estimate of $7000 to change the service in a small commercial builing, change all 3 fuse boxes to updated breakers, install a new panel box to bring 400 amps into a 4 unit building where there was only 100 amps, rewirer all the electric, switches, outlets, bath and kitchen fixtures, run all the wirer and get it passed by the city, including $1800 for permits on top of everything else, then he required another $3000, to buy material, which I gave him, so far $4000. + $3000. + 1800, $8900 BUCKS, he showed up with about $3000. worth of material, but says he will not do any more work untill he is given more money, all he has done is hang the 5 gang meter box outside, and provided 2 breaker panels and some wire, the permits have expired and he has done nothing.. what am I to do.. he was given a permit by the city, but nothing is being done. nothing is being done…

    • bobby kincaid says:

      sue him. take him to court and show them receipts if you have them, its a no brainer..
      you should win no problem

    • Mike says:

      Jackie, what ever happened with this issue?

      I really hope you had a written contract with that guy, detailing the work, time frame and financial expectations. If you do, then yes court is in your favor to collect any damages. If no contract or no details were written in, then you might have a hard time and it will be a “he said – she said” argument.

      For yourself (and this audience in general) this forum is fine for ideas and hopefully pointing people in the right direction, but you all should consult with your respective lawyers and/or insurance agents to get the facts as they apply to your jurisdictions, not all are the same!

      Let us know what’s happened!


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