Bonds can provide essential coverages for your clients and your business. Surety bonds offer assurances that your company will adhere to contractual agreements or comply with applicable regulations, and fidelity bonds provide financial protection against employees’ dishonest acts.
The experienced team at Andrews Insurance Agency in Pawtucket, Rhode Island, can help your business secure the appropriate bonds. Contact us today for details.
What Does Bonded and Insured Mean?
If a business carries surety bonds, it may be referred to as being “bonded.” When it has commercial insurance in addition to bonds, it may be described as being “bonded and insured.” This designation may help companies build confidence with clients who prefer to work with bonded and insured operations.
A surety bond is an agreement among the following three parties:
- The principal is the party that secures the bond (e.g., your business).
- The obligee is the party requiring the principal to obtain a surety bond (e.g., a governmental entity or private client).
- The surety is the party that underwrites and maintains the bond (e.g., an insurance company).
If a principal fails to adhere to a bond’s terms, the obligee may file a claim against the surety bond. After an investigation by the surety company, and if the principal doesn’t resolve the issues, the surety company may provide financial compensation to the obligee up the bond amount. The surety will then typically seek repayment from the principal for that amount.
Types of Surety Bonds
There are multiple types of surety bonds, including commercial surety bonds and contract surety bonds.
Commercial Surety Bonds
Commercial surety bonds provide assurances that a company will meet specific requirements. For example, license and permit bonds provide guarantees that a business will comply with applicable laws and regulations, and a governmental body may require them before issuing a license or permit to a company.
Contract Surety Bonds
Contract surety bonds provide assurances that businesses will fulfill the terms of a contractual agreement. Some entities may also require them before work can start on specific projects. Examples of contract surety bonds include the following:
- Maintenance bonds or warranty bonds—These provide assurances that a finished project’s defect (materials or workmanship) will be fixed or that the project owner will be compensated for the flaw. These types bonds are usually effective for a set term (e.g., one year).
- Payment bonds—These provide guarantees that businesses will pay subcontractors and suppliers for their labor and materials.
- Bid bonds—These provide guarantees that a business submitted a bid in good faith, and that they will start a project if they win the contract.
- Performance bonds—These provide assurances that a company will finish a project in accordance with the contract.
Other types of surety bonds may be available. Contact our agents for more information.
Fidelity bonds are similar to traditional insurance policies as they provide coverage for the policyholder. Fidelity bonds are also called employee dishonesty insurance, and they can help cover financial losses after employees’ dishonest acts, such as the following:
Additionally, coverage for other wrongful acts may be available, as well as for the dishonest acts of individuals working for your business on a contract basis or as volunteers. Reach out to us for more information on terms, limits and exclusions.
The Andrews Insurance Agency team can help your business obtain the bonds that meet its needs. Contact us today to get started.