As a business owner, you know first-hand that many decisions and moving parts can help make your company successful. And your insurance policy coverage is a key component that can help your business prosper since it may affect customer and employee perception of your company. That is because most of your audiences are likely searching for a licensed, bonded, and insured business when they need to select to work/hire for. Apart from various insurance policies, one important type is bond insurance, which may be a legal requirement in your industry, but is always a smart investment. A bond insurance policy can greatly benefit various business owners in New Jersey as this may help them grow their customer base, specifically during small business administration and acquiring leads you can follow up with.
What do you mean by bond insurance?
A bond insurance policy is a kind of insurance policy that one can take in case of default which may guarantee the repayment of the principal and all its associated interest payments to the bondholders.
How does bond insurance work for your business?
It may be quite confusing when you first stare at a surety bond contract for the first time. Various specific insurance terms may denote several involved parties you need to know. They may help you to understand the working of bond insurance and the benefits your business may have with future leads and increased employee retention.
In various industries, clients may need to have surety bonds before they may agree to start working with your business. A surety bond may protect the client as it guarantees that your business will adhere to the law or ordinances and will honestly and faithfully perform all of its duties. If a client may face an issue, then the client may file a claim with the surety to cover the costs of fixing that issue. If this happens, then your business needs to give the reimbursement to the surety. At its most fundamental level, a surety bond is an agreement between three parties—the obligee, the principal, and the surety. Each party plays an essential role in the agreement as follows –
Obligee – An obligee is a party that may receive a remedy (from the surety) in the event of a default, which may occur in case – after an unfinished project, a breach of business contract, or failure to consent with specific laws or ordinances. In other words, the Obligee can be a government entity, private entity, or individual that may need a surety bond that may help regulate industries, protect tax dollars, and safeguard consumers from various financial losses due to poor business practices.
Principal – In the context of bond insurance, the principal is the entity (often a company or professional) requiring coverage. These people or businesses can ensure they follow the rules by acquiring bond insurance. They may also assist you in ensuring that the work they have promised to undertake is completed by the agreed-upon deadline and to the agreed-upon quality.
Surety – A surety is a party that may offer a guarantee to an obligee. If the principal cannot fulfill their accountability, then, in that case, the surety will step in and remedy the default by arranging for performance or payment. Before becoming bonded, the principal must sign an indemnity agreement with the surety company. This indemnity agreement may state that the principal must pay the surety back in case of a loss.
Things that bond insurance may cover –
There may be an endless list of bond insurance choices in New Jersey, including License & Permit Bonds, Bid Bonds, Environmental Bonds, and real estate bonds. Each surety bond type may cover various industries and aspects of your business, so one needs to educate themselves on them to know which bond insurance policy is right for you.
Commercial or performance bonds –These bonds are often purchased by governmental bodies or industry legislation. These are generally purchased by companies or professionals in compliance with the state licensing and permit regulations and guarantee some aspect of a principal’s occupation. The bond guarantees in Singapore assure that your company completes the work that your customer has contracted you to do.
Contract bonds – This is another type of bond insurance that the construction industry usually needs. For example, parties in this bond can specify the expected completion time, project materials, and various other deliverables. Contract bonds can also help protect your customers from any incomplete projects, covering them even if your company goes bankrupt before you finish the project.
Fidelity bonds – Unlike contact and commercial bonds, fidelity bonds effectively are also a form of a bond insurance policy. This insurance bond protects employers against losses caused by their employees’ fraudulent or dishonest acts. Typically, if an employer trusts one or more employees to handle cash or any other valuable assets, then they need to consider a fidelity bond. There are many types of fidelity bonds, including business service bonds, standard employee dishonesty bonds, and employee retirement income security act of 1974 (ERISA) bonds.
For businesses who are unfamiliar with the process, learning about and obtaining bond insurance policies can be overwhelming. That is why it is critical to work with a company that has demonstrated bond insurance experience and knowledge.
So the aforementioned is some bond insurance information. If you are in the market searching for the best bond insurance company in New Jersey, then consult the expert team at Innovate Insurance Agency Inc. Call (973) 530-4104 to consult with our experts regarding our services.
