What Does It Mean To Be Bonded and Insured?

You want your company to become licensed, bonded, and insured to provide your clients peace of mind, but likely don’t know what it means. Many mistakenly lump insurance and bonds together into the same category seeking out “bonded insurance”.

While insurance and bonds have commonalities, they are different products. So, what does it mean to be bonded and insured? In this article, we’ll get bonded defined so that you understand the difference for your newly bonded business and your clients.

What is “Bonded”?

So, how do bonds work and why can’t most insurance agents provide anything other than a vague “bonded” definition? The confusion stems from there being two different bond products that most licensed insurance agents don’t understand. Both allow you to market as a bonded company, but they have different purposes.

Surety bonds create a potential liability for your company, but are required of you by a third party (typically the government) to do business. There are thousands of surety bond requirements throughout the U.S. You can search for your surety bond requirements by state in our database. If you are required to post a surety bond, it is imperative that you understand them by reading our article, “What does surety bond mean?”.

Fidelity bonds provide insurance for your company against employee dishonesty and theft. Should a bonded employee embezzle funds, the fidelity bond will reimburse your company for losses. Usually, they are not required, with the exception of ERISA bonds to protect employee benefit plans.

Surety Bond Meaning

Bonded vs. Insured

When businesses advertise that they are “bonded”, they could be referring to their surety or fidelity bonding. Fidelity bonds are an insurance product for your company, while surety bonds are insurance for the obligee (party requiring you to post the bond). Fidelity bonds work in the same way as property and casualty insurance that most are familiar with. However, surety bonding is quite different, as you are expected to reimburse the surety for claims. This makes surety bonds a form of credit to you. The alternative is usually to post cash in the form of a letter of credit. A letter of credit will require you to 100% collateralize the funds with the bank. When it comes to surety bonds, collateral is almost never required, meaning they are guaranteeing “you are good for it” when it comes to paying claims.

Fidelity Bond Insurance Explained

What Does Licensed & Bonded Mean?

Many occupations require you to obtain a license to operate your business. At times, a surety bond is required to guarantee that you follow the rules of the license. Should you break them, a claim could be filed on your bond.

Not all business licenses require a surety bond to be posted. To see if yours does, you can search the surety bond requirements by state. If your industry does not require a license bond, you can always obtain fidelity bond coverage to protect your clients from your employees stealing from them. This will still allow you to provide the peace of mind your clients are looking for when you tell them you are licensed and bonded.

What Does “Bonded” Mean For A Contractor?

Most have heard of a bonded contractor, but what is a bonded contractor? There are different types of bonds with different purposes.

Being bonded for a job? Contract surety bonds are required for public work contracts due to the Miller Act.

License bonds are required of contractors throughout the country by state and local municipalities. Contractors are required to post these license bonds to work in certain geographic locations. If you’re a contractor, you need to determine what contractor license bond requirements apply to you.

How Much Does it Cost to Be Bonded?

Fidelity bonds are relatively cheap and the rates don’t vary much. However, they vary based on the type of fidelity coverage, the amount of coverage, number of employees bonded, and the controls in place for your business. With all of those variables, you must complete an application to determine your fidelity bond costs.

Surety bond costs are based on numerous factors as well. The type of bond and your ability to pay the surety back for claims determine your surety bond rate. The bond (or contract) amount along with the rate determines your final costs. If you are just in the initial stages of research, you can learn more by reading our article “How Much Does A Surety Bond Cost?”. You can also use our surety bond premium calculator to get a ballpark estimate of costs. If you are ready to purchase, you can get a firm surety bond quote online.

Can I Be Bonded?

If you are only looking for fidelity coverage, you should have no problem getting bonded. On the other hand since surety bonds are a form of credit to you, your financial stability will be verified and there is a possibility that you may not qualify for the bond you need.

License bonds can be approved, even if you have bad credit. However, it is important to find an agency without any middle men involved to keep costs down initially and one who will ensure you have a proper defense in the event of a claim.

Contract bonds are much more difficult to qualify for, as the surety needs to know that you can complete the job and you have the ability to reimburse them for claims if you fail to do so.


Eric is an industry expert that specializes in taking complex surety concepts and explaining them in terms that make sense to the general public. He also manages the JW Surety Bonds website and works with various partners to help further educate the public on suretyship using various mediums.

What our clients have to say

Paige Cotcamp
"I would recommend them highly if you are in the market for surety bonds or similar products."
Ulli Bisono
"When I told them how urgent my request was, they pulled out all the stops and got it done in record time - amazing!"
Eric McMullen
"JW Surety Bonds was able to get me what I needed and gave me the best price of all the bond companies I received quotes from."
Hilda Morfi
"As a small business owner I was looking for a bond company that could issue me a bond at a rate I could afford, and JW Surety Bond by far gave me the best quote."
Stewart Prosser
"Patsy Tinsman seems to always have the answers and goes above and beyond the call of duty to make sure we are taken care of in a timely manner. The personal service she provides makes us think we are her only client..."
Jack Duff
"JW Surety Bonds has continued to meet or exceed my expectations in the past 3 years of business relations."
Jason Webster
"I had a very time sensitive issue that I was needing assistance on. Cori got back to me right away (within minutes) and followed up with me constantly until we had resolved the issue."