Regardless of your company’s size, sector, location and other unique circumstances, formulating appropriate loss control measures must be a top priority. Lacking sufficient foresight and failing to implement suitable plans could mean that even a single accident or unforeseen hurdle might derail your operations and impose devastating financial repercussions. Surety bonds and insurance policies are often core elements of these preparations and understanding how each works is crucial.
What Are Surety Bonds?
Surety bonds may come in many forms and are generally designed to help your business offset financial losses and compensate other parties should you come up short in providing adequate, compliant or contracted services. Specifically, you might need the following types:
Commercial bonds
These products typically safeguard the financial interests of both your company and its clients or customers, as parties impacted by your business’s shortcomings can be compensated.
How Do Bonds Differ From Traditional Insurance?
While surety bonds and traditional insurance policies are often purchased for a common goal of protecting your business’s financial interests, their functionality can differ significantly. Consider the following distinctions:
- Covered parties—While traditional insurance policies typically cover your business and its employees, surety bonds involve an additional party by listing your client or customer as what is known as the obligee. This expanded coverage can compensate other parties outside your business and potentially help you avoid being sued.
- Coverage periods—Surety bonds are often purchased for a single contract or job. Although they may have effective periods, coverage often ends upon completion of a project. Meanwhile, traditional insurance policies are usually retained for a specified term, such as 6 months or a year.
We’re Here to Help
While insurance and bonds may differ in some ways, they can be equally important in financially protecting your business and prospecting opportunities. In fact, many clients may require you to have certain policies or bonds before agreeing to work with you.
At Consoles Insurance Agency, we can offer guidance on these topics and help you find the right products. Contact us today to get started.
This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.