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What it Means to be "Licensed, Bonded, & Insured"

November 17, 2020

Have you heard the terms ‘licensed, bonded, and insured’ before but just don’t know what they are? 

If you're considering hiring a contractor to perform work on your facility, these happen to be pretty important terms to understand. These terms represent levels of legal and financial assurance that a contractor will perform their work to a high standard and can accept financial responsibility in the event that property is damaged or people are harmed. 

But, to really understand the importance of dealing with a company that is licensed, bonded, and insured, we need to go a little deeper. So, this article will unpack each of these terms, explaining them in detail. 

What Does It Mean to Be Licensed?

If a business is licensed, it means that it holds the relevant permits and certifications to carry out the work that they do. So, the idea of being licensed does not refer to one particular license. Instead, there are a number of licenses relevant to each individual industry. 

Usually, the licenses and permits a business requires will come from the level of the state governments. The US Small Business Administration gives a useful summary of the types and permits required across different industries. 

Fire-Related Licenses

The most important aspect of licensing is to ensure the safety of individuals. This includes customers, clients, and anyone else who interacts with a business.

Specific industries obviously have higher risks than others. For example, flying planes or digging mines can be quite dangerous and require specific licenses. 

One of the most important types of licenses that businesses need to be aware of is related to the installation and maintenance of fire safety equipment. There are strict regulations in place to make sure that businesses operate in buildings that meet fire safety standards.

DSC is licensed by the Texas Department of Insurance to install, repair, and maintain fire alarms. It is very important that businesses contract with licensed technicians when installing and checking fire alarms.

In the first place, the Texas Department of Insurance's Fire Alarm Rules clearly state that it is prohibited to 'plan, certify, lease, sell, service, install, monitor, or maintain a fire alarm or fire detection device or system without a license or registration certificate' (see page 27). 

But, it is not just regulations that are a worry. The other major reason why using licensed technicians is so important is that businesses can face civil suits from employees, customers, landlords, and business neighbors if they don't comply with regulations.

This is most damaging in the case that a fire actually occurs and people are injured or property is damaged. 

Security Contracting Licenses

Just like with fire safety, there are some important regulations that control the security services industry. Obviously, the provision of security services has as its major goal the protection of both people and property. 

DSC is licensed through the Texas Department of Public Safety. The Texas DPS has strict standards in place to ensure security personnel have the right training to carry out the work they do. 

But the Texas DPS also has other provisions in place, such as mandatory fingerprinting for security personnel and full FBI criminal history background checks. 

Once again, the issue is not just ensuring compliance with regulations—not providing adequate security may leave businesses open to civil suits. There is no leeway. If you are looking to contract with a security service, they must be properly licensed. 

What Does It Mean to Be Bonded?

To be bonded is similar to being insured, but it represents a much higher level of coverage. The bond ensures that, in the event that business activities cause some kind of damage, payment will be given by the insurer to one or more parties. 

There are a few different contract bonds to be aware of. 

Surety Bonds

A surety bond is a type of bond that insures against a company not meeting contractual obligations. When hiring security companies, it is important that they are bonded because it means that they are capable of providing financial responsibility if property is damaged or persons are harmed while they are working.

But there are many situations in which property can be damaged or persons can be injured. DSC also works in the fields of security system installations, structured cabling, and miscellaneous IT installations.

Whenever you are having work done for your business—particularly if you are constructing new premises—it is important to use bonded contractors. Otherwise, financial losses down the track may be substantial. 

License and Permit Bonds

These bonds are actually mandated by the government, whether at a state or federal level. What they do is ensure that your business operates within the stipulated regulations of a particular industry.

These bonds work to protect regulators and customers.

What Does It Mean to Be Insured?

This is the final necessary element of being able to claim that your business is licensed, bonded, and insured. Business insurance is generally determined by the industry you are working in, and there are quite a lot of different types of insurance. 

Often, you will be required to supply proof of insurance before you contract with another business. This is particularly the case if you are contracting with a government agency.

Public Liability Insurance

The common type of insurance is public liability insurance. This protects a business from compensation claims if customers are injured when interacting with it.

Importance of Being Licensed, Bonded, and Insured

We have already talked about the importance of using contractors that are licensed, bonded, and insured from a legal and financial perspective. But it is also important to remember that using such contractors usually guarantees that the contractor will offer high-quality services. 

This is because a number of third parties—particularly government agencies and third-party insurers—have already checked this business and determined that it does its work to a high standard and can be trusted. 

This will give you peace of mind that your employees and customers will stay safe, and also that your business will stay safe.

DSC Is Licensed, Bonded, and Insured

You should now have a pretty good idea of what it means to be licensed, bonded, and insured. Hopefully, too, you understand the importance of this when conducting business.

The legal and financial risks of not using contractors that are licensed, bonded, and insured are just too high. 

DSC is a licensed, bonded, and insured provider of commercial and industrial security and life safety systems. If you are in need of trusted services in these areas, why not get in touch with us?

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