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.
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?
What it Means to be Bonded
When a business is bonded, it means that in the event that a customer files a suit against the business for theft or property, the customer gets paid by the company that issued the bond.
In simpler terms, a bonded business provides protection for its customers, against theft carried out by the employees of that business. To get this coverage, the business pays a yearly premium to the bond issuer. This saves the business from paying for losses caused by employees.
When a business is insured, it means the business itself is protected from financial losses arising from unfortunate circumstances in the workplace. Premiums are paid periodically to service the insurance cover and claims can be made in instances as highlighted by the terms of the insurance. Popular coverages include insurance for properties, machineries and health of employees.
Bonds are similar to insurance coverage, only that they protect the interest of the customer. As earlier explained, they provide cover for the customer, in cases where employees are found guilty of stealing from the customer.
Employees can also be bonded, especially when they handle large amounts of money or valuable properties. In this case, the company runs a background check to determine if the employee is trustworthy. After thorough examination, the company gets an insurance that the employees won't steal. In the event that the employee steals, the binding company pays the employer the amount of the theft.
How much does it cost to get bonded?
Getting bonded is not expensive. However, a number of factors come to play in determining the amount you should pay to secure a bond. Most times, the cost is determined by the type of surety bond needed and your financial status.
On the average, bond premiums are between 0.5% to 1% of the total bond coverage for fidelity bonds. Therefore, to get a cover of $100,000, you may be required to pay between $500 to $1,000. For contract bonds, the price ranges between 1-3% of the contract.
What is a surety bond?
A surety bond is a contractual agreement between three parties, in which the issuer guarantees to an obligee (entity requesting the bond) that the principal (bond taker) will act according to the terms of the bond.
Who should be bonded?
In general, businesses that care about providing value and protection for their clients should get bonded. If you run an agency that has your employee interacting with clients such that they may cause loss to your clients, it is in your best interest to get bonded.