The phrase \u201clicensed, bonded, and insured\u201d is omnipresent in some industries. You\u2019ll find it in the company’s tagline, marketing media, and client contracts. Far from being just an advertisement strategy, being \u201clicensed, bonded, and insured\u201d carries a lot of meaning. And, for some companies, getting relevant licenses, insurance, and surety bonds is a legal requirement. <\/p>\n\n\n\n
But, while being insured and licensed is standard practice for many companies, not many first-time business owners are familiar with the third term. So what does bonded mean?<\/p>\n\n\n\n
For most customers, ensuring that the business or contractor they hire fulfills all legal requirements is essential – and a significant factor in their decision-making process. Let\u2019s look at the different terms and why your company needs to be bonded, licensed, and insured. <\/p>\n\n\n\n
The phrase \u201clicensed, bonded & insured\u201d has been conceptualized as a quick way to let clients, contractors, and suppliers know that a business meets all industry-specific legal requirements. <\/p>\n\n\n\n
Each of the terms in this phrase carries a lot of meaning, and using it as part of your tagline is not something to be taken lightly. But what do the different terms mean? Let\u2019s start with \u201clicensed and insured.\u201d<\/p>\n\n\n\n
Licensed means that business owners, employees, and managers have the necessary competencies and skills to carry out niche-specific tasks efficiently and safely. These competencies are assessed through standardized tests and certifications that need to be acquired.<\/p>\n\n\n\n
Licenses are industry-specific<\/a>, and the more technical a business is, the more licenses it will require to protect clients, employees, and suppliers. In customers’ eyes, a licensed company has taken all the necessary steps to protect the public\u2019s health and safety and can guarantee high work standards. <\/p>\n\n\n\n Insured shows that your company has acquired the necessary insurance to cover consumers and the company itself in the case of losses, accidents, or injuries. If a business is advertised as licensed, it has purchased insurance covers such as general liability and workers’ compensation. <\/p>\n\n\n\n So, now that you are clear on what \u201cinsured\u201d and \u201clicensed\u201d mean, let\u2019s look at the third term: what does it mean when a company is bonded?<\/p>\n\n\n\n If your business is licensed and insured, you are now probably wondering whether it also needs to be bonded. <\/p>\n\n\n\n In business, \u201cbonded\u201d means that a company has purchased a surety bond. A surety bond is a financial instrument that allows a business to protect another party, such as a client or customer. <\/p>\n\n\n\n If the business fails to deliver the expected results, fails to comply with industry requirements, or doesn\u2019t fulfill its obligation, the surety bond provides compensation to the customer. <\/p>\n\n\n\n Each surety bond provides a certain amount of coverage. The bond cost is a percentage of this amount, usually varying between 1-15%<\/a>. If your business wishes to purchase a premium (bond amount or bond limit) of up to $20,000, you will need to pay between $200 and $3,000, depending on your bonds\u2019 underwriting provider.<\/p>\n\n\n\n The amount you\u2019ll need for your company – and the rates you\u2019ll be able to secure – will depend on your industry, niche, application specifics, and credit health.<\/p>\n\n\n\n Now that you know what to expect from a surety bond let\u2019s look at the technical definition of this financial product. <\/p>\n\n\n\n A surety bond is an agreement<\/a> or contract between three parties: the surety, the principal, and the obligee. This legal document is designed to guarantee that the obligations of a business owner (or principal) are fulfilled. It transfers the risk from the business owner to a third party (the surety provider or the government).<\/p>\n\n\n\n While there are different types of bonds, a bonded company is always preferable to customers, who will receive compensation even if the business fails to meet its obligations. <\/p>\n\n\n\n When a company purchases a surety bond, it becomes liable for any obligations that are not fulfilled and guarantees the client that they will be able to receive third-party compensation. But how do these contracts work<\/a>? <\/p>\n\n\n\n Firstly, there are three parties involved in the agreement:<\/p>\n\n\n\n It\u2019s worth noting that the principal will be required to reimburse any payment (penal sum) made by the surety. <\/p>\n\n\n\n Business bonding and insurance are commonly confused. After all, both protect a third party and the company itself. But some radical differences set them apart. Here are the main three to simplify these concepts:<\/p>\n\n\n\n Unpreventable accidents or injuries might lead to insurance claims filing. Oppositely, surety bonds claims might indicate that the holder has carried out improper business practices that have led to financial losses for their clientele. That is why companies purchasing surety bonds will want to avoid any claim that might affect their reputation. <\/p>\n\n\n\n While surety bonds are not needed for all industries or businesses, some companies can\u2019t start operating without this added layer of legal and financial protection. Just a few of the niches that require surety bonds are:<\/p>\n\n\n\n Purchasing a bond means that your clientele is protected in the case of unethical or improper business practices. Therefore, businesses operating in other industries – such as painting or plumbing companies – might provide consumer protection through a bond, representing a competitive advantage<\/a>. <\/p>\n\n\n\n While there is a range of bonds your business might need, most surety bonds fall into the following categories:<\/p>\n\n\n\nInsured<\/h3>\n\n\n\n
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What Does Bonded Mean?<\/h2>\n\n\n\n
Surety Bond Definition<\/h3>\n\n\n\n
How Do Bonds Work?<\/h3>\n\n\n\n
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Being Bonded vs. Insured: What Are the Differences?<\/h2>\n\n\n\n
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What Companies Need To Be Bonded? <\/h2>\n\n\n\n
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Types of Surety Bonds<\/h2>\n\n\n\n
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