A term synonymous with many contractors and employees, the contractor license bond is a critical aspect of any workplace. However, what exactly does it entail? You might be wondering the answer to this question. Here is a breakdown of this type of surety bond for easy understanding.
1) What are Contractor License Bonds?
Contractor license bonds are an important form of surety bond that serves the best interest of three different parties involved in a contract or project. Apart from helping you as the contractor, these bonds also help other individuals who could be greatly affected by costly business decisions or unethical vices. These include the contractor, the hiring company, and the bond-issuing agency in a particular state. By opting for the contractor license bond, you are committing to provide professional services that will not harm all the parties involved in any way. As a result, one can easily file a claim against the bond for compensation if one is negatively affected by any unethical decision made. If you are in California, you need a professional bonding company that understands the state laws and that which will guarantee fast and easy bonding services.
2) Contractor License Bonding and Insurance Requirements
The licensing process for contractors entails obtaining a contractor license bond and two types of insurance. Both the bond and the insurance provide some kind of coverage or compensation. However, these compensations are only applicable to different parties under different circumstances. For instance, the contractor license bonds protect the client and the public but still expect the contractor to compensate the claimants accordingly. Workers compensation insurance, on the other hand, cover the employees in case of work-related injuries. Finally, the employer liability covers the employers from the suits because of work-related injuries.
3) What are Workers’ Compensation and Liability Insurance Policies?
Unlike surety bonds that cover the claims made against the bond, worker’s compensation and liability insurance policies cover various instances such as workplace injuries, injuries resulting from workplace violence, injuries during work-related travel, natural disasters, fatalities, and illnesses. With this kind of insurance policy, there is a guarantee that the employees will receive aplenty benefits, ranging from medical care, disability income, rehabilitation, to the covering of workplace injuries. It should be mentioned that opting for the worker’s compensation liability insurance prevents the employee from exercising their right to sue the employer for negligence.
4) Contractors Need Both
As you can see, there are strict conditions and exemptions on the types of insurance policies mentioned above. However, the key difference in the two options lies in the fact that once an employer is insured, he or she does not need to compensate the insurance company for all the cases covered by the policy. Additionally, these policies also help to cover employees from all work-related injuries rather than instances of non-payment, which would otherwise be compensated under the payment bond agreement. So, what does this mean? It creates an implication that the contractors need both the insurance policies and a surety bond to protect both customers and the state from the potential damages and violations.