Licensed, Bonded, and Insured – A Summary

A typical marketing phrase used by many companies – large and small – is “We’re licensed, bonded, and insured.”  What exactly is the meaning of each of these?


For specific professions, a license is required to prove competency and/or permission to conduct business (in an area of expertise) in a defined geographic area, including (but not limited to) cities, counties or states.  For example, attorneys are ‘licensed’ to practice law in states where they have passed the bar exam.  Licenses can be verified by local governments, trade associations or the Better Business Bureau.  Companies that are licensed will often list the license number on their advertising documents.  Write down the number and verify with the mentioned agencies to ensure accuracy.


Money is set aside by a company, secured by a bonding company, and controlled by the state as a ‘bond’.  Since the money is in control of the state, the company has no access to these funds and is available for claims made against the company. Bonding generally suggests that a bonding company has conducted a thorough background investigation and determined that a company (or individual) is ‘risk worthy’ enough to have their work guaranteed against possible claims.  If a claim is filed, an investigation is conducted (likely by a state agency) and the bond is used to pay the claim.  Bonding issues can vary by state; once again, do your homework.


Much like personal insurance, this refers to 3rd party coverage for damages that may be caused by the company and/or worker employed.  In some states, companies (or individuals) without insurance could potentially hold the customer liable for damages, e.g. a contractor falling off roof while replacing shingles.  Again, prior to having work done by a contractor, ask for proof of their insurance.

In summary, it is advisable that ANY company/contractor/worker hired to perform a service is licensed (if applicable), bonded, and insured.  In a litigious society such as ours, the risk of lawsuit is too great to risk loss of personal assets for physical or bodily damage done to a hired party.

By Dion D. Shaw

Dion D. Shaw is the founder and owner of Homepreneurs

Homepreneurs.  New Day.  New Opportunity.


Homepreneurs does not endorse nor have any relationships with any of the services listed.  Homepreneurs receives no compensation or consideration for its suggestions.  Homepreneurs strongly urges all interested parties to conduct research and accepts no responsibility for any losses incurred.

© Homepreneurs 2010 – 2012, All Rights Reserved


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