What is the differnce in being bonded and being insured?

Question

I am starting up a rental cleaning business with my sister n law and we want to find out about the differences in being bonded and insured and which or if both do we need.

Answer 1

Being insured, means you have a policy that protects YOU against certain things happening. Usually, it's liability (in case you cause someone else to get hurt, like leaving a bucket at the top of the stairs and they trip and fall down the stairs and sue you), and/or property coverage (like for specialized cleaning equipment owned by the business, or computers for invoicing, etc), or business auto coverage.

A BOND, however, is a guarantee, FROM the insurance company, TO a specific, named entity, that YOU will either 1. perform a job as described or 2. complete a job in a time period . Failure to do that has a set penalty amount, that the insurance company would pay to the named entity.

If you've never had a bond before, then you would have to give them an irrevocable letter of credit from your bank, guaranteeing the penalty amount, or otherwise guarantee the penalty amount.

Unless you're doing work in a government building, and a true bond is required by the contract, you do NOT need a bond.

The insurance will cost you about $1500 a year, if you have two people cleaning, and make less than $75,000 a year.

Answer 2

In most cases, bonding is a type of assurance that you are who you say you are and are not a wanted felon, etc. Insurance is someone taking the responsibility for you if you screw a customer or employee. I would check with your state's board of licensing to find out exactly what is required. A lot of larger accounts will require that you be both, but if you're just going to start with word of mouth jobs, you may not be required to be either.

Good luck.

Answer 3

Bonding is a type of insurance. A Surety bond is what you are actually looking for - assures the customer and covers your liability. You can ask your insurance company to set that up for you.