Surety bonds
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What are surety bonds and who needs them?
Surety bonds are a kind of protection used by businesses to guarantee customers that their contract requirements will be fulfilled. Surety bonds are different from traditional insurance policies. It’s important to note that, unlike general liability insurance, if a surety bond claim is filed, it’s the customer, not the business owner, who receives the compensation.
Surety bonds are predominantly used by trade professionals, like contractors, to ensure projects are completed. However, small to medium-sized businesses (SMBs) in many industries, like logistics, retail, and manufacturing can benefit from them too.
Have assets, like inventory or equipment, that can be stolen or damaged.
Risk customer injury or property damage due to your operations.
Why do you need surety bonds?
Here are a few reasons why you might need surety bonds:
Creates a foundation of trust and credibility between you and your customers.
Demonstrates your commitment to project completion.
Enables proof of coverage when required. For example, your local government may require all contractors to show proof of surety bond coverage as part of a bid response to a request for proposal (RFP).
For example, just like when you order a meal at a fastfood restaurant, when you buy the meal deal, it's cheaper than if you buy your sandwich, drink, and fries individually.
Simplifies the insurance process and makes it easier for you to manage multiple coverages in one business owner’s policy.
It’s invaluable to have the peace of mind that you are properly protected through a range of coverages included in one business owner’s policy so you can focus on growing your business.
What risks do surety bonds cover?
Surety bonds cover a wide range of risks your business may face. Here are just a couple of examples:
A construction company might want to bid on the design and/or construction of a local government building where surety bonds are required.
Due to circumstances beyond your control, you might not be able to finish a project according to the contract terms. The surety bond can help protect your customer’s investment.
If cyber criminals hack a medical outpatient facility (ex., a dentist office) and confidential patient information is compromised, the business owner would be liable.
If a clothing boutique stores its employees’ social security numbers in the cloud and that data is compromised, the store owner is at risk of legal action by the employees.
If a logistics company is victim to ransomware after an employee unknowingly downloads a suspicious attachment, the financial burden can be heavy without cyber insurance.
What is the cost of surety bonds??
The average annual cost of surety bonds can start around 1% and go up to about 15% of the bond amount for a small business, but coverage costs will vary. Here are a few factors that can influence the price of a surety bond for your business:
What other coverage might a business need?
Though surety bonds cover the important aspect of business risk that transfers to customer risk, it is very specialized. Most businesses require more than that to protect themselves. Here are just a few other common examples of risks and coverages and why you may need them to protect your business:
Business owner’s policy insurance (BOP)
Business owner’s policy insurance provides comprehensive coverage by bundling multiple types of business insurance into a single policy. BOP insurance usually consists of general liability, commercial property, and business income interruption insurance. Bundling with a BOP policy saves you money versus purchasing stand-alone policies.
Commercial auto
A commercial auto policy covers vehicles used for business purposes, including cars, trucks, vans, and other vehicles owned or leased by your business.
General liability insurance (GL)
Covers a wide range of risks and can shield you from financial losses and legal expenses from customer injuries or damage to their property.
Cyber insurance
A cyber insurance policy protects you against the consequences of a cyber incident, such as data breaches, network security failures, cyber extortion (ransomware, for instance), and other cyber attacks.
Workers’ compensation (WC)
Workers’ compensation insurance protects employers and employees, covering financial needs in case of any workplace illness or injury. This insurance is required by law in most states.
How to get surety bonds or other coverage
By now you understand how important it is to be properly insured. What’s next?
Call (380) 225-5242 to connect with an experienced insurance agent who understands the nuances of your business and industry.