A bond is a form of insurance that protects your business against potential losses caused by internal fraud, theft, or incompetence. If your employees make mistakes that result in losses for your client, your insurance company pays restitution for damages. Some businesses are required by law to purchase bonding insurance, and others do so to increase the credibility of their business.
A contract bond ensures that if the obligations of a contract are not met, your client will be compensated. If your firm does not complete a project, for example, the bond is paid directly to your client. This allows them to hire another business to finish the work you started. This type of bond is common in the construction industry.
It is important to note that after a bond is paid, your insurance company can pursue recourse against your company for reimbursement of the amount paid out to your client.
Fidelity bonds can help protect your business against losses incurred due to employee dishonesty. In this case, your business purchases the bond and receives compensation if an employee steals from the business or damages a client’s property.
The value of the bond is based on the value of the property at risk. Coverage can range from bonding one single employee to covering all of your employees.
There are many types of bonds available for specific industries and business activities. These fall under the grouping of miscellaneous bonds. Examples include:
Your insurance provider can help you choose the type of bonding insurance that suits your business.
As with any contract, the specifics of your bond are important. A bond will not be paid out if the conditions of the bond contract are not met. Be sure that the situations you are most concerned about are covered by the agreement and that the coverage of the bond equals your financial risk. It’s important to take reasonable and appropriate steps to ensure that the bond will cover all employees.
For further business information on many topics, visit the Canada Business Network, provided by our Government of Canada. Be sure to use the filter to get advice specific to Ontario.
Bonding insurance can help you protect your business against fraud and theft, and it can help you foster credibility with clients. Many careful consumers look for the ‘bonded and insured’ reassurance before they will consider hiring a business to do work for them.
If you would like a no-obligation quote for any type of bonding insurance, or have any questions, contact Sean McNamara at Mitchell & Whale Insurance Brokers today at 1-800-731-2228 or email me at firstname.lastname@example.org. I specialize in commercial insurance and I’d be happy to help you.
Source: Canada Business Network
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