Commercial bonds and commercial insurance are similar in that they both help businesses manage their risk. While commercial insurance typically provides direct protection for a company, commercial bonds often protect a client or third party.
Commercial bonds ensure that a business completes work or follows specific rules and regulations. If, for whatever reason, the company does not comply, a commercial bond provides financial protection to the affected party or client.
For example, if a business contracts to complete a large-scale remodel of an office building, a commercial bond may be used by the developer to guarantee the contractor will perform their duties as agreed upon.
Commercial insurance only requires two parties: the insured (the business that purchases the policy) and the insurance provider. Bonds, on the other hand, involve three parties: the bondholder (the business that purchases the bond), the bond provider, and an obligee (a client).
Surety Bonds
Surety bonds are a tool consumers use to guarantee project completion. If a contractor disappears halfway through a project, the bond will ensure another company is hired to finish the work.
In the instance that a business does not execute the agreed-upon work, the surety company is entitled to seek reimbursement for all job-related expenses directly from the business.
Fidelity Bonds
Sometimes called employee dishonesty insurance, fidelity bonds give companies financial protection when their employees cause issues with clients. In the event of a worker’s fraudulent or dishonest actions, the business and client will have financial protection through the fidelity bond until the situation is rectified.
Could You Benefit from a Commercial Bond?
If you are unsure whether you could benefit from a commercial bond, it’s always best to consult an expert in business risk management. Please contact Steve Longenecker (303-808-9351 x2) at Mountain Insurance: Longmont with any commercial insurance needs or questions.
We give out $25 gift cards for referrals that become our insurance clients.
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