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, a consumer rarely understands what the term "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 the bond penalty if the vendor company does not fulfill its contractual obligations. There are various types of bonds, such as a License Bond, a Performance Bond, a Bid Bond, an Indemnity Bond, a Payment Bond or a Surety Bond. A bond is a financial guarantee that a business will honor its contractual obligations. For example, companies that bid on contracts are frequently required to be bonded.
- A PERFORMANCE BOND is a guarantee that the vendor will perform work in accordance with the terms of a contract.
- A BID BOND is a guarantee the vendor will perform work if the bid is won.
- An INDEMNITY BOND promises to reimburse a loss that is incurred if the vendor fails to perform or if you fail to pay other vendors or subcontractors in the performance of the contract.
- 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 claiming to be bonded don't 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 catchphrase often used by marginal service providers. It is a catchphrase 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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Reader Comments
Interesting take
I loved your distinction between insurance and surety, as it's one that is made quite often because of the parallels drawn between the two industries.
Surety bonds are simply a business’s way of reassuring customers that they stand behind their promises—and if they don’t, consumers will be protected. If a business breaks its promises to its customers and they suffer financial loss, the bond can provide reimbursement.
I have to disagree on your stance that bonding doesn't do anything for the moving company and consumer, however. Being 'bonded' or obtaining a surety bond proves the company's trustworthiness to their consumers, showing they've gone the extra step to ensure their customer's satisfaction. It also puts the consumers mind at ease that they are in good hands with bonded companies.
If you'd like a more in-depth read about "what bonded means", check out our resource: https://www.suretybonds.com/edu/what-does-bonded-mean.html
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