While many people are familiar with carrying insurance for business risks or personal risks, there are also times when an individual may require a form of insurance from someone they want to do business with. This often occurs when you are going to hire a contractor to work at your home or property. An advertisement or business card will announce that the individual or company is licensed, insured, and bonded. You may understand the licensing and insurance part, but you may be left wondering what is a bonding company?
The Bonding Process Explained
As explained by the information on https://www.moodyinsurance.com/, the bonding process is less understood than the other areas of financial protection. A license means your potential contractor has been granted permission by the local or state government to offer a service or perform the work. Being insured means the individual or business performing the work is covered from financial liability in the event of a loss or incident that could occur while doing business. This coverage is often extended to include the client’s property. Being bonded means the contractor, the customer, and a bonding agency share a promise of payment for work performed according to contract terms.
The Benefits of Bond Coverage
Failing to honor a part of the promise could result in a claim, but bond coverage assists with the financial responsibilities of reimbursement or restitution. This is why coverage is highly recommended when operating in a contracting or service-oriented industry.