Contractor guide
Bonded vs. insured, and what "licensed, bonded & insured" really means.
They sound similar and get used together, but a surety bond and insurance do opposite jobs. Here is the plain-English difference, and why most California contractors need both.
One protects your customers. One protects you.
That single distinction explains almost everything about bonds versus insurance.
Surety bond
- A three-party guarantee (you, the obligee, the surety)
- Protects your customers and the public
- Required by the CSLB to hold a license
- If a claim is paid, you reimburse the surety
Insurance
- A two-party contract (you and the insurer)
- Protects your own business against covered losses
- General liability + workers' comp are the common policies
- The insurer absorbs covered claims, up to your limits
The phrase, decoded
Licensed, bonded & insured
Three separate things a legitimate California contractor carries.
Licensed
You hold an active CSLB license for your trade. It is the legal baseline to contract in California.
Bonded
You carry the required $25,000 contractor license bond, which protects your customers.
Insured
You carry liability coverage, and workers' compensation if you have employees, to protect your own business.
Questions
Bonded vs insured FAQs
Is a surety bond the same as insurance?
No. A surety bond is a three-party guarantee that protects your customers and the public; if a claim is paid, you reimburse the surety. Insurance is a two-party contract that protects you against your own covered losses. They do different jobs, and most contractors need both.
Does 'bonded' mean I'm insured?
No. Being bonded means you carry a surety bond, like the $25,000 contractor license bond. It protects your customers, not you. To protect your own business you need insurance, typically general liability and workers' compensation.
What does 'licensed, bonded, and insured' mean for a California contractor?
Licensed means you hold a CSLB license. Bonded means you carry the required contractor license bond. Insured means you carry liability and, if you have employees, workers' compensation coverage. All three together signal a legitimate, compliant contractor.