If you are in business, you may have heard the term “surety bond” before and wondered what it is, exactly. This type of bond is similar to insurance, but unlike how insurance works, in this case, this bond does not protect the company who holds it, it protects the obilgee, in most cases, the consumers. When you have insurance, you will pay a deductible, but there are none when you have this type of bond and with insurance you must pay a deductible if there is a claim but with a surety bond, you must pay the entire claim.
Why Would I Get a Bond if It doesn’t Protect Me?
Many business owners wonder why they must be bonded if the bond doesn’t protect them. The short and easy answer is because it’s the law. In most states, you must have a business license to operate legally, but you cannot get this license unless you have a bond. Fortunately for you, however, bonding does have some advantages, like people will trust your business more and will have more peace of mind when dealing with your company, and this can lead to more profits.
What Will Bonds Cover and How Much Can They Cover?
There are many types of bonds out there and they will cover many things. They can be used in a variety of ways such as to guarantee payments, ensure that taxes are being paid, as protection in the case of breach of contract and anything else that may be needed.
Most bonds will have a limit, also known as a cap. That cap will ensure that it only pays out a certain amount and won’t exceed it. So, if your bond is set at $50,000 but you have $60,000 in claims, it will only pay the $50,000. You will be responsible for the rest of that $10,000. You see, when you are bonded, many companies will try very hard not to break the rules and have a claim filed against them. Though this may not even apply to your personal business, in the past, too many companies tried to take advantage of consumers and even the state and country, so these bonds because the norm.
In order to see if you need a surety bond for your business or to learn more about them, contact a broker in your area.
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