What Does It Mean To Be Licensed And Bonded?


“We’re licensed, bonded, and insured”. That’s a phrase you’ve probably heard or seen about a thousand times. It’s associated with trust – you wouldn’t go with a company that wasn’t licensed, bonded, or insured, would you? You know that the phrase means security, but what does it mean practically? The insurance part is obvious – the company has insurance, for their employees and for the project. Let’s look at what it means to be licensed and bonded:

Being licensed is actually fairly straightforward – it means that everyone on the job will have appropriate licensing. This does not necessarily mean that everyone working will have the same license. You might, for example, have carpenters building a house for you. Some of the carpenters on the job site might be apprentices – they have the appropriate license to apprentice, but not the appropriate license to supervise a job site.

Here in Manitoba, you can find the licensing requirements for many trades on the Government’s website. You’d be amazed at the licensing requirements and levels for various trades and professions. In fact, feel free to ask an insurance broker in Winnipeg about the various CAIB and CIP tests and requirements; there are several levels you need to go through before becoming a certified insurance broker!

With licensing out of the way, we come to bonding. Being bonded generally means that a company has a surety bond. What’s a surety bond? In technical terms, it’s a guarantee that a guarantor (the bond issuer) will pay an obligee (the person purchasing services) if a principle (the person offering services) fails to meet their end of a contract.

There are a bunch of reasons it’s important to find a bonded contractor. The first is that if the contractor, for whatever reason, fails to complete your project, you may be reimbursed in some capacity. This is often through the hiring of another contractor to complete the project, though financial remuneration might also be on the docket.

Bonded contractors are also a lot more trustworthy. That’s not just because you have some guarantee in case something goes wrong – it’s because an insurance company trusts the contractor. Let’s be frank for a moment. Insurance companies don’t trust just anyone – it’s an actuarial game of risk assessment. When someone has a history of making insurers pay out bonds, insurers just won’t do business with that company anymore. When a company is bonded, it’s a strong sign that they get their work done on schedule, with few or no mishaps.

The trustworthiness of bonded companies may also mean you get better rates. Bonded companies tend to have better credit and respect, so suppliers and creditors may be more liberal with their terms. That means those companies can secure better financing, which can mean fewer costs for you.

You always knew why you wanted a company to be bonded, licensed, and insured – it means security. Now, hopefully, you know why it means security – and you can rest a little easier because of it.