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Bonds Insurance
Protect yourself from the hassles of default. Take bond insurance to have a financial guarantee
When you are in a capital-intensive business or businesses with high risk involved, it is always better to add an extra layer of safety to your business. This is where bonds come to your rescue. A bond is a great way to guarantee that a large investment in a project is not lostâwhether or not the work gets done. This type of insurance is generally common in the construction industry and is often utilized for government contracts.
What are bonds?
A bond is a contract that involves three parties. It is commonly issued when a person/business is providing a service to another entity. The entity that is receiving the service may want to have an assurance that the service provider will fulfill the terms of the contract as agreed upon. If the service provider fails to fulfil the required services, then the recipient of the service can seek compensation for damages by making a claim on the bond.
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Why do you need them?
Bonds have become an essential part of a business, with their usage spanning across multiple industries.
You need them because a bond is a guarantee to your customers that your business is licensed and allowed to offer services or products to the general public.
In Washington, you need bonds also when you apply for a license from a State Department of Licensing or other authorities. For example, contractors are often required to get bonded in order to work on federal or state construction projects. Additionally, it guarantees that in performing business, you will comply with state laws.
To get started, you may need to secure a bond. Make sure that you secure the right bond that suits your needs and goals.
How do bonds work and safeguard businesses?
In adverse events when the business provider defaults in offering the required services, causes damage to your property or violates any other parts of the contract, you can seek compensation from the bond that was issued. Therefore, you can enjoy peace of mind when engaging with a bonded service provider.
Additionally, bonds can also act as an extension of credit to principals. Principals can cover themselves against any immediate out-of-pocket expenses when theyâre bonded. This allows them to have continuity in their business operations, and a layer of security against costly damages.
To purchase a bond, the business service provider pays a premium to an insurer. The insurer then pays the necessary compensation to the agency if the contractor fails to deliver. The big difference between this and ordinary insurance is that the insurer will pursue the contractor to get this money back in case of insurance while in case of bonds, no body chases the money.
Types of Bonds
Based on the scope of work, there are different types of bonds available, used to offer assurance to contracts that are signed between the involved parties.
01. License and permit bonds
Also known as commercial bonds, their primary purpose is to protect the public against the services offered by businesses that are licensed by the state. For example, a cleaning contractor that you hire to clean your commercial property is often required by the state to be bonded. These bonds will protect you in case the contractor does not meet the expectation of the contract, does not pay subcontractors, or causes damage to your property during the project.
02. Contract bonds
Contract bonds are mainly required for public construction projects where contractors are expected to be bonded in order to protect the interests of the public and taxpayersâ money.
03. Court bonds
Court bonds are a common type of bonds that are required by the court of individuals who need to appeal a court decision, desire to become legal guardians of minors or disabled persons, or who seek to operate as fiduciaries of an estate.
04. Fidelity bonds
Sometimes employees act dishonestly, causing clients harm. Fidelity bonds allow an oblige to be compensated for theft and damage to their property as a result of the actions of an employee.
Based on the coverage, there are again four types of commercial bonds from the providers end:
01. Bid Bond
Ensures that the bidder on a contract will enter into the contract and furnish the required payment and performance bonds if awarded the contract.
02. Payment Bond
Ensures suppliers and subcontractors are paid for work performed under the contract.
03. Performance Bond
Ensures the contract will be completed in accordance with the terms and conditions of the contract.
04. Ancillary Bond
Ensures requirements integral to the contract, but not directly performance related, are performed.
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How can Safeguard help?
As you start or grow your business, it is important that you delegate tasks to the appropriate people so that you can focus on running your business. We at Safeguard are right here to help you with the security and insurance aspect so that you can focus on building your business. Rest assured, we will frontload all that is required to erect your financial security net.
Professionals with years of experience at Safeguard will sit with you to assess your business needs, aspirations and recommend whatâs right for your business. From surety bonds and probate bonds to license bonds, bid bonds, performance bonds, lost instrument bonds, and more, figuring out what bond you need can be a daunting task. Moreover, the fact that each state and the federal government has its own requirements makes the decision even more complicated. Thatâs where we come in.
So, what are you waiting for? Allow us to help obtain the security youâve been looking for.
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