MONDAY, MARCH 27, 2023
A business may fail to complete an assignment that is has contractually promised. In these cases, the business may have to compensate the client for the incomplete work. The company may even have to pay the client regardless of whether the company is at fault for the work delays.
Many businesses buy surety bonds to protect their financial obligations to clients.
What are surety bonds?
Surety bonds are a form of insurance, but are different from the standard policy. Surety bonds essentially protect the promises and contracts that businesses make.
These bonds promise clients a certain compensation in case a company can’t complete its work. For example, if a surety bond is worth $10,000, then it will provide that amount to the client.
How do surety bonds help clients and businesses?
Surety bonds are beneficial on both sides of the client-business relationship.
These bonds can protect businesses who cannot complete their work as they promised. They can protect clients by covering any lost client costs due to the failure of the company.
However, don’t confuse surety bond payments with insurance claim payments. A surety bond will issue a payout to a client. However, the contractor who carries the bond will have to compensate the bond company. This is one key difference between surety bonds and standard insurance.
A surety bond guarantees that a contractor will pay a client the promised amount of the bond. Clients have the ability to make a claim on the bond if they feel the work was not completed as promised. The bond company has to compensate the client for the value of that bond if the contractor doesn’t do their work correctly and on time. The contractor will then pay the bond company back.
Affording a Bond
Buying and paying for a surety bond is sometimes a complicated thought process. Like your insurance policies, you will have to pay a premium to carry these bonds.
The cost of premiums generally vary based on what type of bond you carry. If you work in a high-risk business, the cost of your bond is likely higher. Bond prices usually cost a certain percentage of the total bond price. For example, a bond may cost $25,000. The price you pay for this bond may be one percent of the bond’s value. That’s $250 that you have to pay to maintain the bond.
A certified bond writer will guide you through getting enough bond coverage.
If you need to purchase a surety bond, get in touch with ISG Insurance right now. We can get you a fast bond quote that will protect your contractual promises. Go online now for a fast, free quote. Give us a call at 865-457-9907 for more information.
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