Surety bonds are a type of insurance that benefits both the business that holds them and the business's customers. There are several types of bonds that businesses can maintain to provide customers and clients with confidence, while also protecting their business' financial well-being. In general, bonds work much like insurance. They provide a promise to provide financial support or other benefits in the case that a contract or promise is breached. The surety company then works to settle the claim.
What are Surety Bonds?
Surety bonds involve three parties. The first is the principal, who will provide the work (or the business that acquires the bond). The second is the obligee, who is the person who is requesting the work to be done, such as the customer or client. The third is the surety, or the company that provides insurance of the work. The business purchases the surety bond through the insurer. The insurer agrees to pay off the client or customer should the business fail to perform as required. It sounds simple enough, but why is it necessary?
The Benefits to the Customer
Oftentimes, businesses in the service industry will state they are "insured and bonded" when advertising to customers. Customers want to see this because it means there is some level of protection in place in case something goes wrong. For example, if a customer hires a bonded business to pour a new driveway and the job is done poorly, the customer may be able to file a claim against that bond to be reimbursed for the costs of hiring another company to fix the first job. Very specific requirements are in place to allow this to occur, of course. However, the customer is protected and that's a key selling point in any situation.
The Benefits to the Business
As a business owner, surety bonds provide peace of mind and reduced competition. With fewer people having these bonds, there's fewer people competing for customers. Most importantly, they can also protect the business from lawsuits, which can create a significant level of financial instability for a company.
Surety bonds offer assurance, confidence and the high likelihood of quality work. This can make a big difference for today's consumer, as well as business owners.
Get the information you need. Call Insurance Agent2000 at (925) 827-0510 for more information on Concord surety bonds.