Bonded and Fully Insured

Nothing will save you money like making informed decisions. You can’t do that if you accept everything at face value. Case in point, the phrase “Bonded and Fully Insured.”

This wording can be seen in advertisements and on vehicles. What does it mean to you? Probably peace of mind that you have nothing to worry about if these people do work in or on your home. That’s what it implies but let’s dig a little deeper.

Bonded could simply mean they have acquired the necessary license and permit bond to do business. This doesn’t do anything for you. They may also have an employee dishonesty bond but this protects them, not you. There are bonds available that will protect you and an example is a Janitorial Bond which some cleaning companies purchase. If an employee steals your money while cleaning then there may be coverage for your loss. Some bonds require that the suspect be convicted of the theft before they will pay. So you have to make the accusation (if there are five people cleaning your house at the same time I don’t know how you sort this out) and the person must be prosecuted and convicted.

So the next time you see “Bonded” in an advertisement you might wonder exactly what they are saying.

Fully Insured is even worse. No one I know in the insurance business can agree on what this means. If they can’t, how is it a local contractor can slap that on the side of their truck and use it as advertising (easy, they just do it).

Here’s a short list of things that can go wrong. First, they may not have all the policies they need. Generally a business needs a liability policy, an auto policy and workers compensation (I’m oversimplifying for purposes of this example.) Also, there are different types of coverage available on a general liability policy and there are different limits. Let’s say the contractor has a coverage limit of $300,000 on his liability policy but burns down your $500,000 house. We’d probably agree he was not “Fully” insured at that point. Since you probably won’t read his insurance policies, you won’t know the breadth of coverage he carries so there could be a loss which is not covered at all.

When I have work done by certain companies at our house I request a Certificate of Insurance from them. This lists the policies they currently have and indicates that as of the date of the certificate, coverage is in force. But, if a payment is due the next day and it's not paid, their policies can cancel and they’ll be on your property doing work without insurance coverage. Obviously they are not fully insured at that point.

Besides requesting the Certificate, I usually call the agent the day before and verify that coverage is in force. I don’t, for example, like having people on my roof who are not insured for workers compensation. If something happens I want to make sure the worker is taken care of and I’m not on the hook.

So, the next time someone says they are “Bonded and Fully Insured” ask them exactly what that means. You might even get a blank stare and that, of course, is not a good thing.

With special thanks to Doug Kinney, Ernie Lee and Gene Stuart for insight and information.