What Does 'Bonded and Insured' Really Mean?

May 14, 2010
Consumer advice – including that coming from your BBB – routinely recommends making sure a contractor or business (roofer or house sitter, for example) is “bonded and insured.”

And you’re thinking to yourself, “OK, but why?”

Let’s say you’re going on vacation and rather than kennel your poodles or rely on the teenage girl next door, you hire a house sitter. When you return after a weekend in Vegas or a week in Waikiki, you discover some pricey jewelry missing. Now what?

Or here’s another scenario the BBB hears a lot: A homeowner hires a contractor to repair a roof or remodel the basement and midway through the job the contractor picks up and leaves never to return. Now what? 

The answer to “now what” is your losses are covered if – and only if – the business or contractor is bonded and/or insured.

Businesses that are “bonded” – typically those that work at your home or business – do background checks on employees. But bonding provides other protections, including coverage if the job is not completed. If a contractor walks out on a job, the client can make a claim on the bond and be compensated. And that homeowner with the missing jewelry can also make a claim.

Insurance, on the other hand, covers liability issues that may arise in the course of someone’s work. If a house painter is injured in a fall off a ladder, his or her insurance would provide compensation, not you or your insurance carrier. A bond wouldn’t kick in because the injury won’t prevent completion of the job.

When hiring a contractor or business to do work around your home or business, ask if they are bonded and insured and ask to see documentation that verifies it. And don’t forget to check out their BBB Business Reliability Report.