License and permit bonds are those required by state law, municipal ordinance, or by regulation and in some instances by the federal government or its agencies. To be licensed, a contractor must have a bond and, in many states, a certain amount of insurance coverage. The bond may either be one written by a Surety company or, in many states, a cash deposit made with the State. In practice, the terms "license" and "permit" are used interchangeably. The purpose of a license or permit bond is usually to safeguard the public health, welfare, morals, or assure the public's safety. These bonds are usually for the benefit of laborers, suppliers, and taxing authorities, as well as most persons having contracts with the contractor. The amount of the bond (the "penal sum") is the total limit of the Surety's liability to all claimants combined. Thus, where a contractor has several claims lodged against its bond, the protection for any individual may be much less than the frill amount of the bond. A license or permit bond may thus provide someone with only minimal protection. Before entering into a construction contract it is wise for an owner to call the licensing agency to be sure that the contractor is in good standing with bonding, and where specified by law, insurance coverage, and to determine whether there are any claims pending against the bond. Please note that all contractors should have general liability insurance, but one may only check on the status of such insurance with state agencies in those states that require the insurance -for licensing.