Permit Bond

What Does Permit Bond Mean?

A permit bond, also known as a license bond, is a type of bond that professionals in certain industries must purchase to operate legally. This bond guarantees that the professional is qualified to perform their job and will comply with all applicable legal and regulatory requirements. Permit bonds are commonly sold by insurance companies.

Insuranceopedia Explains Permit Bond

Permit bonds are often required for professionals such as plumbers and contractors. The bond does not replace a trade’s liability coverage, so a plumber running their own shop usually carries a separate policy on top of the bond, and plumbing insurance costs vary by state and job mix. General contractors are in the same boat: most states want the bond in place before issuing permits, and the contractor still has to budget for general contractor insurance costs on top of the bond premium. If a bonded professional fails to perform their work to the standards outlined in the bond, the bonding company compensates the customer for their losses. This dual function of permit bonds serves as both a quality control measure and a form of insurance, ensuring that consumers are protected from financial losses when hiring professionals who fail to meet their obligations.