How to Become Licensed, Bonded & Insured

If you’ve just started working in a new line of work, you may be overwhelmed by all the jargon involved. Employers may want to know if you are bonded and insured, licensed and insured, licensed and bonded, or maybe even all three, but what do all these terms mean, exactly? 

Read on to learn about what this entails, including how to get licensed, bonded, and insured, and why going through these processes is well worth it.

What does it mean to be bonded?

What does bonded mean for a business? Put simply, it means that a bonding company has done a thorough background check on you and deemed you trustworthy. The bonding company then guarantees your employer that if you steal any of their property (which of course, you wouldn’t), they will pay your employer the value of whatever was taken, hypothetically speaking.

What does it mean to be insured?

Being insured protects you in the case of injury on the job. If you get injured while working and the company you work for is insured, the claim is filed against the company’s insurance. Otherwise, the individual or individuals you are working for would be responsible for the claim.

Insurance also protects the physical well-being and property of your employer. If while working, you accidentally injure the person who hired you or damage their belongings, insurance covers the necessary medical costs or repairs.

What does it mean to be licensed?

Being licensed provides proof that you are qualified to work in a specific area, such as electrical work or construction. If you have a license, your license number must be printed on any advertisements you release so that potential employers can find more information about you. 

In most U.S. states, someone can use your license number to look up your history through the Better Business Bureau. Note that being licensed is a requirement for some jobs, but not all.

How can I get licensed?

The process of getting licensed varies depending on the exact kind of work you do. Generally speaking, you will need to prove your ability to do your job well by undergoing official training, education, or obtaining experience in your field. Here are some resources on how to get licensed from the small business administration.

How can I get bonded?

Before you figure out how to get licensed and bonded for a business, you will need to decide which kind of bond you want - a surety bond or a fidelity bond.

A surety bond is a bond that an organization (typically the government) mandates you to obtain in order to conduct business. It involves three parties: the principal (you), the obligee (whoever requires you to become bonded), and the surety (the insurance company). 

Put succinctly, a surety bond establishes rules that you must follow while working, and if you fail to meet these standards, you will be required to pay the insurance company accordingly.

A fidelity bond, sometimes erroneously referred to as bonded insurance, is not usually a legal requirement, but it creates a sense of security for your employer. It is a promise to your employer that you will conduct business honestly and not engage in behavior like fraud or theft.

To get a security bond, you will need to go through a licensed agent. To get the best possible service, you should choose an agency that either specializes in bonds or has a separate bond department. Be aware that your agent will probably have difficulty finding a bond you qualify for if your credit is inadequate. In that case, they may need to connect you to a larger agency that can give you access to a high-risk bond program.

A fidelity bond is usually less expensive than a security bond, but the exact price varies depending on the specifics of your business needs. Fortunately, there are numerous online services dedicated to estimating how much a fidelity bond will cost you based on the information you fill out about your business. Getting a quote for this is often free.

How can I get insured?

When deciding the particular type of insurance you want, consider the risks involved with your line of work. Once you have decided what kind of coverage you are looking for, a licensed commercial insurance agent can help you find the policy that best fits your needs.

Make sure to research an agency before working with them to ensure that they are reputable and have your best interests in mind. You should also do some research of your own comparing the pros and cons of different policies, and be sure to reexamine your needs as your business grows and evolves, to decide if it's time for a new policy.

Why should I get licensed, bonded, and insured?

As previously stated, getting licensed may or may not be a requirement based on the kind of work you do, but even if you are not obligated to obtain a license for your work, it is recommended that you get bonded and insured. Why? In short, it makes your business much more appealing to potential employers.

Think about it from an employer’s point of view. Who are they more likely to hire - a worker who has promised to be financially responsible for problems caused by them doing their job incorrectly or dishonestly, or one with no such guarantees attached to them? The answer is obvious. This is why it’s recommended that you become bonded.

As for insurance, employers will naturally be hesitant to hire a worker who is uninsured because of the financial risk it poses for them. If you get hurt in a work-related accident at your employer’s home or cause damage to their property, they will not want to pay for this using their homeowners or renters insurance.

Showing an employer that you are insured will save them a lot of worry before hiring you, and will undoubtedly make you the better candidate for the job.

Whether you get licensed, bonded, insured - you can now see how it can help you get more jobs and make you more successful in your line of work.

Pro Tip: Make sure to track your company mileage and log your receipts for your employers with Everlance.