What Does it Mean to Be Bonded and Insured?
If you run a commercial business, fostering trust and loyalty among your target audience is more important than ever. Issues with supply chains and an economy that is unpredictable has shaken consumer faith, making developing a business model based on transparency and trust more crucial. And as any business owner knows, your customers are the reason you’re in business. When you put their protection at the forefront of your business strategy, you build the kind of loyalty that drives sales and results in repeat customers.
One prominent way to present your business as a trustworthy partner is to carry insurance and bonds. You may have seen company websites or literature that signals a business is “insured and bonded.” But before you explore what being bonded and insured can do for your company, you must first understand the difference between the two.
What’s the Difference Between Being Bonded and Being Insured?
Being bonded, insured, or both can help your business protect vital assets in the event of unexpected problems, as well as providing your business with a more professional — and trustworthy — profile. Before you dive into purchasing insurance and/or bonds, however, it is important to understand the vital differences between these two products.
What Does it Mean to Be Insured?
For small businesses and enterprises alike, being insured typically refers to the purchase of business liability insurance. There are several types of business liability insurance products, including:
General liability insurance
A general liability insurance policy will help protect your business against losses that result from a variety of scenarios from bodily injury, property damage, and medical expenses to libel, slander, lawsuit defense, and the settlement of judgements or bonds.
Product liability insurance
If your business sells products rather than services, product liability insurance can protect your business against financial losses that can result from defective products.
Professional liability insurance
For lawyers, accountants, doctors, and other professionals this insurance product protects against losses caused by negligence, errors, and malpractice.
Commercial property insurance
Insurance on commercial property protects your company property from loss and/or damage caused by natural events such as storms, fires, floods and also vandalism and other acts of civil disobedience.
Insurance for home-based businesses
This insurance product can be added to your existing homeowner’s insurance to provide coverage for business equipment located at your home as well as liability coverage in the event of third party injuries occurring at your home.
Business owner’s policy
For many small businesses, a business owner’s policy that combines several coverage options into a single bundle can help simplify the insurance process and reduce expenses related to insurance.
What Does it Mean to Be Bonded?
Businesses that are “bonded” have purchased a surety bond. Surety bonds can protect your business from specific claims relating to theft and fraud, incomplete work, or shoddy work. For each bond there are three active parties: The company that is underwriting the bond, called the surety; the business purchasing the bond, called the Principal; and the client requesting the bond, called the Obligee.
For example, a construction business may purchase a surety bond at the behest of the individual for whom you are performing construction work. If you do not meet your contractual obligations to the customer, the insurance company from which you purchased your surety bond will pay a fee or fine to your customer to make them whole. However, there are many types of bonds, including:
This rather specific bond is often carried by janitorial companies to protect their customers against theft perpetrated by a dishonest employee. Having such a bond can help create peace of mind for potential clients and help them feel confident about your company’s trustworthiness.
License or permit bonds
License or permit bonds are typically required by many government agencies to provide protection from harm caused by companies that violate laws or regulations. Typically, such bonds guarantee that work will be completed and helps provide public assurance that your business is legitimate. Specific bonds such as contractor license bonds may be required before trade contractors can apply for a contractor’s license.
Permit bonds are often required by municipalities when work is required on property owned by the city to ensure that other parties are not harmed if the contractor violates a law or ordinance or commits fraud.
To protect against harm caused by the actions of dishonest employees or employee misconduct, many companies opt to purchase fidelity bonds. These bonds are also known as Commercial Crime Policies, Crime Insurance Coverage, Employee Dishonesty Bonds, and Financial Institution Bonds.
Contract bonds or performance bonds are instruments issued to one party to ensure the obligations of the other party are met as specified in the contract. They can also be required in commodity contracts to ensure the buyer that the commodity will be delivered or the buyer will receive compensation for any losses.
Why Being Bonded and Insured is Important in Our Post-Pandemic World
Now more than ever, customers need reassurance that your business is legitimate, and you will deliver the goods and/or services you promise. During the recent pandemic, consumer confidence was shaken as many businesses closed down or were not able to match the hype generated by their marketing strategies.
Having both insurance and bonds in place can help foster the trust and confidence necessary to grow your business — and separate you from your competition. While most businesses need professional and general liability insurance, additional coverage and bonds necessary will depend upon your industry type, whether or not you have employees, whether you handle sensitive information, and whether or not you drive frequently for work.
That’s where the professionals at Schuetz Insurance can help. We specialize in business insurance for small to large businesses, regardless of industry. Our focus on client care ensures that you get personalized one-on-one assistance in selecting the right policies to ensure that you — and your customers — are protected. Contact us today to learn more!
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