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In the business realm, understanding the precise definition and significance of words and terms is crucial, especially when interacting with employees and clients. However, the challenge arises when, depending on the industry, similar terms, words, and phrases can take on diverse meanings. So, what exactly does being “Licensed, Bonded, and Insured” signify, particularly when discussing general liability insurance and contractor licenses with an insurance company?

You might have come across this phrase when exploring how to get licensed, or perhaps you’ve seen a variation of it emblazoned on work trucks, in advertisements, or within contracts. But have you ever paused to ponder its true meaning or questioned its relevance? Fortunately, our insurance professionals have nothing but insurance on their minds. They’ve sought answers to this very question and are eager to impart their insights.

Regulations Behind Being ‘Licensed, Bonded, and Insured’

The existence of the phrase “insured, licensed, and bonded” is deeply rooted in regulations. These regulations encompass industry standards, governmental directives, and public safety measures.
Some sectors necessitate stringent regulation due to their profound impact on society or the environment. The consequences could be catastrophic if things were to go awry, especially when it comes to compensation insurance or the wrong type of bond. To mitigate such risks, our society has devised various types of regulations tailored to distinct industries. The aim is to ensure a foundational level of knowledge and experience, which in turn, ideally fosters a consistent standard of safety and professionalism.

Understanding Licensing Regulations

One form of regulation is licensing. Requiring a license is very common If you work for the government or are under government contact.  Each state has defined different minimum requirements that you must meet, forms to submit, and fees to pay to obtain a license.  Individuals or businesses often require licensing to conduct operations in a specific state.

There are also hundreds of different professions that require a license to legally perform their duties. Every industry has different standards but the point is to protect the public from someone who has no experience or training and ensure that people put the time and energy to understand their industry and perform their tasks safely.

Licenses usually come with continuing education requirements.  This requires the licensee to fulfill educational or other types of credits necessary to maintain the license.  This is another attempt to help keep the public and workers as safe as possible.

Complying with Surety Bond Regulations

The next common regulation is the need for a surety bond.  This is the Bonded part of the term. The requirement is that the business must have something called a surety bond. A surety bond is a promise to be liable for the debt, default, or failure of another. It is a three-party contract by which one party (the surety) guarantees the performance or obligations of a second party (the principal) to a third party (the obligee). 

In short, the person doing the work pays a fee to a Surety Company and the Surety Company issues a piece of paper promising the customer that if the worker fails to do the job, the surety company will pay to make it right. When it comes to getting bonded, different levels of surety bonds will cost different amounts of money.  To get a closer estimate of costs, you will need a quote from the bonding agency or an insurance agent such as the ones here at Insure Your to determine what your payments will be.

Importance of Properly Insured

Next up, insured.  When a person or entity says they are insured. They are representing that they have purchased an insurance policy that covers their work.  Purchasing an insurance policy is different for every business.  It depends primarily on the type of work you perform and where you are located while working.  Insurance policies are very specific about what is covered and excluded. Be sure to read and review all the details of your policy.

Insurance aims to put the parties back in the position they were in before the loss happened. It’s like fixing a crack in the driveway, but not repaving the entire thing.  You are no better than you were before but you are no worse.  When an event happens that is included in your insurance policy the coverage will provide a dollar amount to fix, replace or cover fees.

A business owner and their employees are at risk every day from the unexpected, the unknown, and the unforeseen.  Insurance is a tool to fix these issues and get businesses and individuals back to the place they were before the event happened.  Insurance protects people and businesses and allows our society to grow and move forward.

Keeping everyone safe

Traffic Cones

By requiring a professional to have insurance, a license or a bond, governments and industries are trying to regulate the risk to business and the public in case something goes wrong. Some common industries that will require one or all of these items are construction contractors, motor vehicle dealers, freight or transportation, and the mortgage, finance, insurance, and tax industries.

It’s with good reason that these industries are highly regulated.  Shortcuts, shady sales practices or incompetence can lead to a pretty huge mess.  People could be injured, structures destroyed or personal financial life can be ruined.

So, the next time you see the term Insured, Licensed and Bonded you will understand that it is primarily to keep you, workers, and the public safe. And it’s always a good idea when working with professionals to get a copy of their documents or proof of their insurance, licenses or bonds.

InsureYourCompany provides comprehensive Technology Business Insurance solutions to protect your company from potential risks and liabilities. Our policies are tailored to meet the unique needs of your technology-based business. Request a free quote today and ensure the future success of your company.