construction workers handshake

“Licensed, bonded and insured” is a common phrase used in the context of service-related businesses. While you might have encountered all or some of them, you might not fully understand their meaning and relevance as a consumer. Each term refers to a different aspect of a contractor’s credentials and financial protection. In short, they provide peace of mind to the public about the reliability and accountability of the service provider.

Contractor’s Credentials

Here’s a look at what each term means:


Being licensed means that the business or individual has obtained the necessary permits, certifications, or permissions by the powers that be to conduct business legally in a particular area or industry. These licenses often indicate that the individual or business has met certain standards of competency, safety, and professionalism set by these entities. For example, a contractor may need to be licensed by the state or local government to work on construction projects. Operating without a license can be illegal and grounds for being shut down. Some states issue licenses for general contractors, while others only require them for specialty trades. Cities and counties can also have their own ground rules.


Being bonded refers to the business or individual having purchased a surety bond. A surety bond is another layer of protection. It’s a form of insurance that gives clients or customers the upper hand in case the contractor fails to complete a project or fulfill contractual obligations. If there’s a claim against the contractor, the bond ensures that the customer receives compensation, up to the amount of the bond. In this way, bonds can help the consumer financially and indicate that the contractor is committed to following up.


Being insured means that the business or individual has purchased the necessary types of insurance coverage in the event of claims related to accidents, injuries, property damage, or other unforeseen events. Common types of insurance for businesses include general liability insurance, workers’ compensation insurance, property insurance and professional liability insurance. Insurance coverage helps the homeowner’s cause and can come in handy if the contractor encounters any mishaps or accidents during the course of work.

Why it matters

Now that you have a high-level understanding of these important qualifications, let’s dig a bit deeper. Here’s why they matter practically for the homeowner or anyone doing business with the party:

Credibility and trust

When a business is licensed, bonded and insured, it sends a message that take professionalism and credibility seriously. It shows that the company is legitimate, compliant with regulations and maintains certain standards of quality and integrity. This instills confidence in potential clients and helps establish trust from the outset of any dynamic.

Legal compliance

As mentioned above, operating without the necessary licenses or permits can lead to legal consequences, fines and even a forced closure. Being properly licensed ensures that the company is operating within the bounds of the law, protecting both the business and its clients from legal liabilities.

Financial protection

Bonding provides an extra layer of financial protection for clients. In the event of contractor default, such as bankruptcy or failure to complete a project, the client can make a claim against the bond to recoup their losses. This minimizes the risk for clients and provides reassurance that they won’t be financially harmed should something unforeseen happen.

Risk mitigation

Insurance coverage protects against various risks and liabilities that may arise during business operations. Whether it’s property damage, bodily injury, or legal claims, having adequate insurance coverage ensures that the company is prepared to address any issues without incurring significant financial losses.

Professionalism and accountability

By being licensed, bonded, and insured, businesses demonstrate a commitment to professionalism, accountability, craftsmanship and excellence. It shows that they are serious about their work and willing to stand behind their services.

Do your homework

Determining whether a company meets these criteria is an important first step in researching. Here are some steps you can take to verify their credentials:

  1. Check government websites: Most licensing authorities maintain online databases where you can verify the status of a company’s license. Determine which one applies to your city, town or state and use their search tool to look up the company’s license status.
  2. Trust but verify: Request copies of the company’s license, bond certificate and insurance policies. A reputable company should have no hesitation in providing this information. Ensure that the documents are current and valid and note any specific requirements or limitations outlined in the policies.
  3. Verify bond information: If the company claims to be bonded, ask for details about their surety bond, including the bonding company’s name and contact information. You can then contact the bonding company directly to confirm the purported facts.
  4. Contact insurance providers: For insurance coverage, verify the company’s policies by contacting their insurance providers directly. Ask for confirmation of coverage amounts, policy limits and any exclusions or endorsements that may apply to the services you’re seeking.
  5. Ask for references: Request references from the company and reach out to past clients to inquire about their experiences. Pose questions about the company’s adherence to contractual agreements, their handling of any issues or disputes and whether they provided proof of licensing, bonding and insurance as promised.
  6. Consult legal or industry experts: When in doubt, consider consulting legal experts, industry associations, or consumer advocacy organizations in your area. They can provide guidance and resources to help you make informed decisions.

In conclusion, the phrase “licensed, bonded, and insured” communicates credibility, legal compliance and financial protection in business. Whether you’re a homeowner hiring a contractor or a business engaging with service providers, doing your due diligence is crucial for your peace of mind and protection. By prioritizing these points of difference, you can mitigate risks, avoid potential legal issues and ensure a positive and smooth business experience for all parties involved.

JO Mory is licensed, bonded and insured. We take pride in serving customers in Northern Indiana, the Tri-State area, and beyond. If you have questions or would like to arrange for a free quote, please Contact Us online or give us a call: 800.621.6679.