Construction issues in California are common, and to prevent disruptions or financial loss, it is important that construction companies and contractors have the proper protections against liability. When a company says it is bonded, licensed and insured, this shows they have gone through the regulatory hoops. This also makes them more credible, especially for larger projects.
According to The Chron, there are numerous licenses a contractor or construction company must have in order to run a business. There are professional licenses that the state approves based on certain requirements and qualifications, and there are trade licenses that contractors must have to perform certain jobs. There may also be specific licensing requirements by the city or work zones. Someone hiring for a project can look up these license numbers to find out the history of performance.
Purchasing appropriate insurance policies is imperative in the construction industry. Insurance can help protect against a variety of things, such as injured workers, fire, natural disasters and even theft. Without insurance, a company can quickly go into financial ruin.
According to Investopedia, a bond is necessary in addition to insurance because it provides additional protection for construction projects. For large projects, there may be two parts to a bond. One is to protect investors in the event there is nonpayment for labor or materials, and the other part provides protection against project incompletion. The party in charge of building the project applies for a bond from a surety company, which conducts a financial and background check before approving the bond.