Breaking down “Bonded and Insured,”
As a service professional, it’s likely that you’ve heard the phrase “bonded and insured.” But, what does it mean? In this two-part series, we’ll dissect the terms bonded and insured and how they pertain to the painting industry.
What does “bonded” mean?
Being bonded refers to the act of obtaining and maintaining a surety bond. So, what is a surety bond?
A surety bond is a financial guarantee between three parties: a principal who purchases the bond, an obligee that requires the bond and a surety that produces the bond. By posting a surety bond, the principal pledges to perform a job ethically and in accordance with the surety contract and the requirements of the obligee. By producing the bond, the surety backs this pledge.
If the principal fails to uphold his end of the contract, the surety will pay the obligee up to the full bond amount to cover any resulting financial losses. In turn, the principal will be responsible for reimbursing the surety.
Who needs a bond?
Professionals in countless industries are required to be bonded by various local, state and federal governmental agencies. There are also a few types of surety bonds that aren’t required by law, but are put in place to protect consumers in the event of wrongdoing by a business or professional.
Interestingly, surety bonds for professional painters can fall into both categories, depending on the bond type in question.
Some states consider painting professionals to be contractors, and — as a result — require these individuals to obtain a contractor license. Typically, these professionals must post a contractor license bond (also called a contractor bond) to obtain the license. To find out if your state requires contractor licenses for painters, visit the Contractor’s License Reference Site.
On the other hand, some states keep professional painters separate from other types of contractors or categorize them as specialty contractors. In these states, painters might be able to post a business service bond. Although business service bonds aren’t required by law, they act as a good marketing tool and a way to protect the customers that hire the painter. How? By purchasing a business service bond, the painter guarantees that he or she will perform ethically and lawfully while on the job — which will most likely take place in the customer’s home or office. If the painter breaches this agreement, the customer will be protected. Generally, customers are more inclined to work with businesses that are bonded because it’s clear that these businesses take their responsibilities and reputations seriously.
Contacting the government agency in charge of licensing for your industry is the best way to find out if you’re required to purchase a surety bond. Typically, this information is readily available on the agency’s website or at its office.
Bonding and insurance can seem confusing, but they don’t have to be. Working with the agency in charge of licensing for your state and industry is a great place to start. Stay tuned for part 2 in which we’ll break down the insured part of “bonding and insured!”
Sara Aisenberg is the director of educational outreach at SuretyBonds.com. Striving to help professionals in a number of industries understand the intricacies of licensing and registering, Sara makes it a point to stay up-to-date on what’s going on in the bonding and insurance world. Connect with Sara on Google+.