Is being bonded the same as being bonded and insured? When hiring a firm or person to do certain tasks for you or your business, or is common advice to look out for, and where possible, only hire businesses that are bonded (i.e., surety bonds).
Even though a bonded business may come at a higher hiring fee than unbonded businesses, it is safer. That’s because you get the security of having another company review the financials and wherewithal of the bonded business.
Or are we wrong? What is the difference between a bonded and unbonded business? Does it count? Do you need to be bonded and insured?
What it Means to be Bonded
In simpler terms, a bonded business provides protection for its clients, safeguarding against theft committed by the business's employees. To secure this coverage, the business remits a yearly premium to the bond issuer, freeing the business from having to bear the cost of losses perpetrated by its employees or other unforeseeable circumstances.
When a business is insured, it denotes that the business itself is secured against financial losses arising from unfortunate events within the workplace. Premiums are paid periodically to maintain the insurance cover, and claims can be made as per the insurance company's terms and conditions. Common coverages include insurance for properties, machinery, and employee health.
What is the difference between being bonded and insured?
Though similar to insurance, Surety Bonds mainly protect the interests of the customer. They provide coverage for clients in situations where a company's employees are found guilty of theft.
Employees can also be both bonded and insured, especially when their job roles involve handling large sums of money or valuable assets. In such cases, the company conducts a background check to ensure the employee is trustworthy. After a thorough assessment, the bonding or insurance company provides a surety that the employees will not cause financial harm. If, however, an employee breaches this trust by stealing, the surety company remunerates the employer for the amount lost.
Acquiring a surety bond is not significantly expensive. However, multiple factors influence the price you would need to pay to secure a bond, including the type of surety bond required and your financial status. For example, bond premiums are typically between 0.5% to 1% of the total bond coverage for fidelity bonds. As such, to get coverage of $100,000 for a surety bond, you may need to pay between $500 to $1,000. Contract bonds, however, range in price from 1-3% of the contract value.
How much does it cost to get bonded?
Go here to learn more about the Cost of a Performance Bond.
Surety Bond - The logo features two people shaking hands and a contract document on an off-white background. This visual marker signifies the assurance a surety bond provides, a security embraced by suppliers and businesses alike, in a scene we can assume is commonplace within this industry.
A surety bond is a contractual agreement between three parties, in which an insurance or surety company guarantees to an obligee (the entity requesting the bond) that the principal (bond holder) will act in accordance with the stipulated terms of the bond.Here is our post on the definition of a surety bond, a critical element in the realm of business insurance, taking into account the vital role it plays when it comes to managing business-related risks.
What is a surety bond?
In general, businesses that care about providing value and protection for their clients should get bonded. If you run an agency that has your employees interacting with clients such that they may cause loss to your clients, it is in your best interest to get a surety bond. This sort of certified indemnity is beneficial, especially when taking on a new project. Many clients prefer to hire firms that are licensed, bonded and insured due to the assurance of legal protection that they provide.
Obtaining a surety bond, needless to say, is also tightly linked with your company's credit score. Better credit standing often corresponds to more favorable rates for your surety bond premiums. In the United States, surety bonds are typically used by individuals and businesses to provide protection for losses arising from contractual obligations, offering the assurance necessary for liability and compensation purposes. An individual can use it as collateral for a contractor or any other financial security measure. A business, on the other hand, can use it when they have subcontractors on site, to ensure that the work will be completed in accordance with contract agreements.
Who should be bonded? Should your Company look into getting a Surety Bond for its Business?
If you have a business, there is a good chance that you are required to carry a surety bond. It is a valuable security measure and an essential ingredient in the business insurance package. This type of bond protects individuals from financial loss as the result of dishonest or negligent actions on behalf of your company. For example, if someone were to get injured while working for your company and they filed a lawsuit against you, the surety bond could function as an indemnity, covering their medical expenses until the legal issue was resolved in court. If it turns out that your company acted negligently or dishonestly in this situation, then the individual would be compensated using funds from your surety bonds. Being bonded meaning you are secure and compliant with legal regulations.
Is it Hard to File a Claim Against a Contractor that Has a Surety Bond?
It is not hard to file a claim against a company that has a surety bond. In the United States, surety bonds are typically used by individuals and businesses to provide protection for losses arising from contractual obligations. An individual can use it as collateral for a contractor or any other financial security measure. A business can use it when they have subcontractors on site in order to ensure that the work will be completed in accordance with contract agreements.
Conclusion
If you have a business, there is a good chance that you are required to carry a surety bond. This type of bond protects individuals from financial loss as the result of dishonest or negligent actions on behalf of your company. For example, if someone were to get injured while working for your company and they filed suit against you, then they could use the surety bond to cover their medical expenses until the lawsuit was resolved in court. If it turns out that your company acted negligently or dishonestly in this situation, then the individual would be compensated by using funds from your surety bonds. Being bonded meaning you are secure.
