When you get ready to hire a company to do a job for you, it is likely that you will hear (or read) the phrase, “We are licensed and bonded”. But what exactly does that mean? Does it really matter if a company is licensed and bonded? As a home or business owner, hiring a workman or service company is part of life. Knowing the importance of bonding and licensing can make the difference between a job you are pleased with one in which you are burned.

Bonding and Licensing Q&A:

1. What is bonding? Simply put, bonding is “A third party obligation promising to pay if a vendor does not fulfill its valid obligation under contract.”
2. Are there different types of bonds? Yes. There are 5 types of bonds: Performance Bonds which guarantees that work will be accomplished as stated in the contract; A Bid Bond which promises you (the company) will perform the work if you win the work contract; a Indemnity Bond which guarantees to reimburse loss incurred for failure to achieve the work or if payment to other vendors is not done; a Licensed Bond which is required in some states for certain business; and, a Payment Bond which promises you will pay all subcontractors and material providers for items used on the job.
3. Is a bond the same as insurance? No. A bond only means that a job will be completed properly and as the contract stated.
4. What about licensing? Depending on the type of job, licensing is not necessarily needed. However, most states require a general business license. Companies with a license are often more reputable and are a bit easier to research for customer reviews.
5. How can I find out if a company really is bonded and licensed? Contact the Register of Contractors or the Contractor’s State Licensing Board.
6. Why is licensing important? Licensing allows you to assure yourself that you are getting qualified workers. Typically, getting a license requires fingerprinting and a background check. Also, a licensed contractor often has a minimum of 4 years experience and must pass at least 2 test that demonstrate knowledge of their field.

With any job, you get what you pay for. By hiring a licensed and bonded contractor, you are protecting yourself and taking the steps necessary to see that you have a job with which you are pleased.