What Does It Mean To Be Bonded?

“Bonded”, “licensed and bonded”, and “bonded and insured” are all phrases you might see on the side of a contractor’s truck or on an auto dealer’s billboard. Business owners use these phrases for a marketing advantage over their competitors to show they are safe to do business with, but they all don’t necessarily mean the same thing.  So what does it mean to be bonded, and how does it translate to being safe to work with?

Bonded Occupations

Bonded With Surety Bonds

A company that’s bonded has one or both of two very different bond types, surety bonds or fidelity bonds. Let’s begin with surety bonds. When a company or individual is bonded with a surety bond, it guarantees they will fulfill the obligations of their profession, which vary drastically as there are hundreds of different surety bonds required of just about every type of occupation. If those obligations aren’t met, the surety bond guarantees any negligence by the bond holder will be made right. Surety bonds are required by third parties, often the government, of many professions to legally operate, such as mortgage brokers, telemarketers and contractors to name a few.

Let’s use a common real world example to explain what it means to be bonded with a surety bond. A contractor in California who wants to get a license is required by the state to get a contractor license bond. The bond guarantees the contractor will follow the terms and regulations of the license. When the contractor gets their surety bond, they can be issued a license. The surety bond guarantees that if the contractor breaks the terms of the license, such as failing to complete the job or correct defective work on a client’s home, the homeowner can be reimbursed if they file a claim on the contractor’s surety bond. Take a look at our video to learn more about bond claims. The main takeaway here is the surety bond is a guarantee obligations will be met and acts as protection for the public.

Bonded With Different Surety Bond Types

The bonded contractor scenario above used a license surety bond as an example. There are other types of surety bonds individuals may be referring to when they use the term “bonded”, such as contract bonds. Contract bonds guarantee terms of a contract will be fulfilled, and are required to work on public construction projects.

There are also court bonds, which guarantees an individual or organization will fulfill their obligations as ordered by law or the court. For more information on the surety bond types discussed above, take a look at our license and permit bond center, our contract bond catalog or our court bond center.


Bonded With Fidelity Bonds

A bonded company or individual can also have a fidelity bond, which serves a completely different purpose than surety bonds. Someone who is bonded with a fidelity bond gas a form of insurance which can protect both themselves and their clients against employee dishonesty such as theft. Unlike surety bonds, fidelity bonds don’t guarantee anything and are generally not required. A common real world example of a company that is bonded with a fidelity bond is a cleaning company, as they are often in clients’ homes to perform their job. If the cleaning company has a business services fidelity bond and an employee steals a client’s personal property, the fidelity bond can cover the losses.

Bonded With Different Fidelity Bond Types

There is also an employee dishonesty fidelity bond, which protects the business owner from employee dishonesty by their own workers. If you would like to learn more about fidelity bonds, visit our fidelity bond center. If you are unsure about whether you need a surety or fidelity bond, you can take a look at our bond insurance infographic for guidance.  

Hopefully this guide has provided a better understanding of what it means to be bonded as well as clarified the distinction between the various types of bonds. If you still have additional questions, feel free to leave a comment below or contact us directly.