licensed, bonded or insured

Licensed, Bonded or Insured: Which Do You Need to Be?

Alan Melton

   License, Insurance, Or Bonds, What Does Your Business Need?

When you conduct a business, whether it is small or big, product-based or service-based, you need to be appropriately insured, licensed and bonded. Clients need to know they are investing their hard-earned money with a trustworthy organization. That is why they enquire if you’re insured, licensed, and bonded in case of mishaps, damages, failure to finish the project, or any other unforeseen incidents.

If your business is licensed and bonded, it assures the client that in case of contractual violations, or failure to deliver products and services as promised, you will take complete responsibility; meaning they will be compensated for all their losses. Similarly, if your business is insured, your employees and your clients are assured that their interests will be protected in case of damages, both personal and property.

These financial entities provide adequate support for clients, thereby building trust and credibility for your business. Given the gravity of these financial products, it is best to be well-informed on the subject. That way, you can make an informed decision if your business needs to be insured, along with being licensed and bonded. Let us take a look at each of these protective financial entities in detail.


Business Insurance is a financial product that is highly consumer-centric, much like other forms of insurance products. Business insurance extends to you, your employees, and your clients. It is viable protection against unforeseen incidents at the workplace or related assignments.

If your business is adequately insured, then the insurer promises to provide financial support in case of damages sustained personally or on your property. It safeguards your valuable assets and keeps your business secure against liabilities.

Business Insurance provides a multitude of benefits. While most businesses need insurance for small accidents or thefts, some businesses need insurance for massive financial protection. Here are a few reasons why you need Business Insurance:

  1. It protects your interest in case an employee is injured while on the job. This is particularly beneficial if your business is associated with risks such as in construction, manufacturing, use of hazardous substances and fumes, water or fire, etc.
  2. Any risks that may cause injuries to your clients or staff within the limits of your property.
  3. Any damage to your overall commercial property.
  4. Any damages to business vehicles such as busted tires, degrading engine systems, or even combustion.
  5. In case of any personal injury, which includes physical harm, defamation, slander, or libel that could hurt or damage your business’s reputation.
  6. Any damages sustained to equipment, furniture, machinery, and electronics.
  7. In case of theft on your property.
  8. In case of legal liabilities due to business negligence or malpractice.
  9. In case of disabilities, as per state regulations.
  10. In the case of home-based businesses or alternative employees on different payroll.

You must always get an adequate Sum Insured, taking into account all the major factors that affect your business. Your premium will largely depend on your Sum Insured, the risks posed by your business models, such as using hazardous substances, the performance of your overall business, and your financials. You need to represent your business finances accurately to determine your Insurance premium, as it will be verified when you make a claim.

Business Insurance is a protective financial asset. Aside from being licensed and bonded, it is best to get business insurance beforehand than sustaining any subsequent damages from the situations mentioned above.


Bonds are similar to insurance; except that they provide an added protection to your insurance plan. It is very much like getting a super top-up plan on your health insurance. These bonds protect you from liabilities that may arise due to circumstances caused by deviations from a contract that you may have signed.

There are 4 main types of bonds that are helpful for your business:

  1. License and Permit Bonds

The license and permit bonds provide assurance that your organization will abide by all the rules and regulations outlined in the contract. These bonds are particularly held by government agencies under municipal, state, or even federal jurisdiction.

These bonds prove to the client that the agency will not default on their contract. Usually, the tenure for these bonds ranges from 1 – 5 years.

  1. Surety Bonds

A Surety bond is a contractual agreement among three parties, i.e., your business, your client, and the surety insurer. In a way, these bonds are proof of credibility. In case you fail to meet your contractual obligation to the client, the surety insurance provider pays a fine or fee to the client. You are obligated to pay this amount back to the insurer in a specified time frame, as stated while framing the policy.

These bonds are predominantly used by private corporations branded with government approval.

  1. Contract Bonds

Contract bonds, as the name suggests, are specific to each project that the company undertakes. Banks or insurance companies issue these bonds to assure the clients that if their business violates the terms of the contract or declares bankruptcy during its tenure, the client will be compensated accordingly.

These contract bonds have specific directives as to your performance. You must adhere to specific client requirements such as timely completion of the project, use of material approved by the client, etc. Thus, these bonds are also referred to as “Performance Bonds.” You must comply with the terms of your Contract Bonds to avoid any fines on violations.

  1. Fidelity Bonds

As the name implies, these bonds are extended insurance to protect you against unlawful actions, both intentional and unintentional, committed by your employees. You and your business will be compensated if your employees conduct any fraudulent behavior such as theft, embezzlement, fraud, damages, etc.

While bonds are optional for most licensed and insured trades, they are necessary for industries where the stakes are higher. If you own any of the following types of businesses, then it is best to be licensed and bonded for maximum security of your assets and those of your clients:

  1. Jewelry designing, manufacturing, and stores.
  2. Car dealerships.
  3. Art dealerships or galleries.
  4. Brokerage firms.
  5. Insurance corporations.
  6. Under-taking Government Contracts.
  7. Construction Firms.

These industries have greater risks and assets. Therefore, you must be properly licensed and bonded to avoid any governing violations and protect your business in case of unforeseen damages.

licensed, bonded or insured


A license is a necessity that allows you to conduct business. Whether you are a doctor, a lawyer, a realtor, an interior decorator, an actor, or just about in any profession, you need to have a valid license. If you run a business, then you require multiple licenses for all your services.

Licensing is largely dependent on where you conduct your business. If you work from home or have a home-based business, then you must speak to your local agencies for specific licensing requirements. If, however, you run an office-based organization, such as hotels, law firms, financial advising, and other high-profile trades, in particular, you require a number of licenses as per the regulations of your local government. Here is a list of business license(s) that you may need based on your products and services:

  1. Use of land under zoning commissions.
  2. Building and constructing as per state, city, or county regulations.
  3. Environmental factors that are affected by your business.
  4. Fire safety and hazards.
  5. Health and safety protocols.
  6. Various business operations.
  7. Different services that are provided by your business.
  8. Authorization and signage.

You can purchase a business license or complete several mandated tests to acquire one. The terms of acquiring a license are determined based on the technical and personal risk associated with your trade. Make sure to speak with your local governing authorities about the licenses required for your specific business model. It is illegal to practice most businesses without a proper license.

While acquiring a license allows you to start your business operations, certain services require additional permits, such as serving alcohol, physiotherapy, neuro massage, etc. Therefore, you must be properly licensed and bonded to provide such services legally.

Business operations are frequently liable to various external modulations. To run a successful and legal operation, you need to comply with local protocols, all the while protecting your financial well-being. Licensing is necessary, whereas insurance and bonds provide a fail-safe for your business against unforeseen calamities, both natural and human-made.

Ensure That Your Business Is Properly Insured, Licensed and Bonded

 New clients, investors, and loan providers are much more likely to conduct business with you or provide financial aid if your finances are well protected. It assures them that their investments are in good hands. Therefore, you must ensure that your business is properly insured, licensed and bonded, and abides by the governing regulations in your county, city, state, and country.

I hope you find this blog useful in determining your business’s kind of insurance, bonds, and licensing. If you need further assistance, kindly book a session with me.


In the end, all businesses will need some form of license, and you should protect yourself with bonds and insurance. In some cases you may want to consult a good business attorney. Starting up a business? Check out this Business Startup Checklist.

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