Whenever a consumer asks me if my moving company is "bonded" what I hear is someone who is worried and looking for a measure of assurance that my company is reputable and won't take advantage of them. However, it is rare that a consumer understands what "bonded" actually means, and why the term "bonded" does not usually pertain to the moving and storage industry.
From time to time a business (particularly a business performing a contracting service) will be required to bond their company's work in advance. In some states certain types of contractors are required to be bonded. So what is a bond? How does one obtain a bond? And what purpose does a "bond" serve?
Simply put, a bond is a third party's obligation promising to pay a penalty if a vendor company does not fulfill its contractual obligations. There are various types of bonds such as a License Bond, Performance Bond, Bid Bond, Indemnity Bond, Payment Bond or a Surety Bond. A bond is a financial guarantee that a business will honor it's contractual obligations. For example, companies which bid on contracts are frequently required be bonded.
- A PERFORMANCE BOND is a guarantee that you will perform work in accordance with the terms of a contract.
- A BID BOND is a guarantee you will perform work if the bid is won by you.
- An INDEMNITY BOND promises to reimburse loss incurred if you fail to perform or if you fail to pay other vendors or subcontractors in the performance of the contact.
- A LICENSE BOND is required by some states for certain businesses. In some cases you pay the state directly rather than obtaining a bond.
- A PAYMENT BOND promises you will pay all subcontractors and material providers utilized in the performance of a contract.
- A SURETY BOND protects consumers if an a company conducts business unethically, breaks any laws or causes the consumer to sustain a financial loss.
It is important to remember that a bond is NOT an insurance policy; a bond only provides assurance that the contracted work will be completed according to the project specifications. For example, a bond will not pay for property damage or personal injury resulting from the work which has been performed. For this type of coverage you will need a conventional insurance policy.
So what good does using a "Bonded" mover do for the moving & consumer?
In my opinion the answer is "perhaps nothing." In fact, I suspect that many moving companies who claim to be bonded don't actually know what bonding entails and may well not even be bonded. Furthermore, of all types of bonding which is available it is apparent that the only type of bonding which may benefit moving & storage consumers is surety bonding.
"Licensed, bonded and insured" remains a catch phrase often used by marginal service providers. It is a catch phrase designed to press a hot button with the consumer and consumers who are searching for a reputable mover would be much better off to abide by the suggestions outlined in our article How To Find A Mover You Can Trust.
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