It’s common to see businesses proudly tout that they are licensed, bonded, and insured. Most consumers feel more confident when dealing these companies. But not everyone understands what this really means or what is required for a business to become licensed, bonded, and insured. To begin, every business should be licensed according to specific state and federal requirements. But the topics related to being bonded and insured are a bit more detailed.
General Information about Being Bonded and Insured
Bonded and insured are not the same things. However, both are types of financial protection. Some businesses are required to purchase this protection; it qualifies the company for certain types of work and job contracts. Being bonded means the project owner is protected against financial loss related to unsatisfactory work. In most cases the bonds are acquired through surety companies.
Insurance policies, issued by insurance companies, are a way to provide protection for the company against any damage claims resulting from damage to property or injuries to people. Worker’s compensation is one type of insurance that falls under this type of protection. Insurance companies handle the pay out of claims against the company.
Obviously, whether the business offers janitorial services or if it is a mortgage brokerage, being bonded and insured is beneficial. The protection tends to elicit a certain level of trust from consumers. That’s why most companies include this information in their marketing campaigns. It conveys the fact that the company can be trusted to complete work as described. In other words, consumers will feel they can rely on this company to fulfill its obligations.
Types of Bonds
It’s not surprising that numerous types of bonds are available. The variety makes it possible for companies to find the right bond for their particular needs. For example, a performance bond is used by companies that perform work. This bond ensures that the work will be completed as defined in the contract.
A surety bond is a type of contract that involves three or more parties; the party that is receiving the services, the party performing the work, and the surety. Simply put, the protection is provided by the surety company.
It is important to note that an insurance bonds is a type of investment. This is a type of life insurance. After holding the bond for a period of years investors can enjoy specific benefits.
Getting Bonded and Insured
Insurance and bonding companies establish certain guidelines that companies must meet in order to become bonded and insured. Some of the things looked at include the company’s financial status, how long it has been in business, and its ability to perform work satisfactorily. Such things as the company’s resources, net worth, and credit history may be considered.