How to get bonded and insured for a small business

Getting bonded and insured is a critical step for any small business. Many licenses, contracts, and clients require proof of bonding and insurance before work can begin. While these terms are often used together, bonding and insurance serve different purposes and require separate steps.

Understanding how each works helps you stay compliant and financially protected.

What Does It Mean to Be Bonded and Insured?

Being insured means your business has insurance policies that protect you from financial loss due to accidents, injuries, or lawsuits.

Being bonded means you have a bond that guarantees you will meet specific obligations, such as following laws, completing a contract, or handling client funds properly.

Most businesses need insurance for protection and bonds for compliance.

Step 1: Identify What Your Business Needs

Start by determining which requirements apply to your business.

You may need insurance if:

• You work with customers or clients

• You operate vehicles for business

• You have employees

• You want protection from lawsuits

You may need a bond if:

• A license or permit requires it

• A contract mandates bonding

• You work in a regulated industry

• You handle customer money or property

Requirements vary by industry, state, and contract.

Step 2: Choose the Right Insurance Policies

Common insurance policies for small businesses include:

• General liability insurance

• Professional liability insurance

• Workers’ compensation insurance

• Commercial auto insurance

• Business property insurance

Not every business needs every policy, but most need at least general liability coverage.

Step 3: Apply for the Required Bonds

Common bonds for small businesses include:

• License and permit bonds

• Surety bonds

• Contract bonds

• Fidelity or employee dishonesty bonds

Bond approval depends on:

• Credit history

• Business experience

• Financial stability

• Bond amount required

Unlike insurance, bond claims must be repaid.

Step 4: Submit Applications and Get Approved

Insurance and bond applications are separate processes.

Insurance approval is based on:

• Business operations

• Claims history

• Revenue and payroll

• Risk exposure

Bond approval focuses heavily on financial trustworthiness and credit.

Some businesses can be bonded and insured within the same day.

Step 5: Maintain Coverage and Stay Compliant

Once approved:

• Keep policies active and paid

• Update coverage as your business grows

• Renew bonds and insurance on time

• Provide certificates when requested

Lapsed coverage can result in lost contracts or license suspension.

How Much Does It Cost to Get Bonded and Insured?

Costs vary depending on:

• Industry and services

• Business size and revenue

• Number of employees

• Coverage limits

• Bond amount and credit score

Insurance premiums are ongoing.
Bond premiums are typically a small percentage of the bond amount.

Common Mistakes Small Business Owners Make

Some of the most common mistakes include:

• Assuming a bond replaces insurance

• Buying the minimum required coverage only

• Not listing all services performed

• Failing to disclose regular drivers or employees

• Letting coverage lapse

Avoiding these mistakes prevents denied claims and compliance issues.

Frequently Asked Questions

What is the difference between being bonded and insured?
Insurance protects your business from losses. Bonding protects the client or authority requiring the bond.

Is bonding required for all small businesses?
No. Bonding is usually required only if a license, law, or contract mandates it.

Do I need insurance before I get bonded?
Not always, but some contracts require both before work begins.

How long does it take to get bonded and insured?
Many small businesses can obtain insurance and bonds within one business day.

Do bond claims affect insurance premiums?
No. Bond claims must be repaid and do not function like insurance claims.

Can a new business with no history get bonded and insured?
Yes. New businesses can often obtain both, though bond approval may depend on credit.

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