Being licensed, bonded, and insured means that the business has purchased some of the most traditional insurance policies that just about every business needs, such as workers comp and general liability insurance policies.

Becoming licensed is important, because it not only signifies that you are skilled but also ensures that you have the leverage necessary to perform the job for which you are hired. For example, in some states it is necessary for a general contractor to be licensed to gain permits necessary for home improvements.

Bonding is vital for many service providers, because it gives clients the added assurance that they are protected should the relationship sour. Because the city or state may be on the line if a licensed provider causes harm, becoming bonded may be necessary to get a license. Check with your local licensing agency to find out about the bonding process for your profession.

While bonding and licensing are about protecting the interests of clients and the community, being insured is all about protecting your business. Every industry and profession has certain business insurance types that are required or highly recommended, like malpractice, liability, and workers’ compensation.

Although insurance protects the company interests, it also ensures that employees, community s, and clients are protected. Because it’s important to be properly insured, you may need to show proof of specific kinds of business insurance to become licensed and bonded.