As a business owner, your clients have certain expectations of you. You put a lot of effort into maintaining a good reputation, but sometimes, it just isn’t enough. A bond can back up your good name, proving to clients that you are dependable and capable of being trusted. When you purchase a bond, you are assuring your customers that they can hire you with the confidence that you will follow through on the job at hand.
Surety bonds are contractual agreements between three parties – you, your client, and your bond issuer. When you purchase a surety bond, the bond issuer guarantees that you will pay for valid breach-of-contract claims made against you by your client. Note that it is not insurance for you, but more like a line of credit. You are still responsible for covering claims out of your own pocket. However, the bond issuer assumes responsibility for the claim if you fail to pay. At that time, the bond issuer may pursue collateral from you by liquidating your assets or acquiring some other form of compensation.
Surety bonds are common among independent contractors that work for hire. They serve as an insurance policy for your client that guarantees the promises you make. Not only can this better qualify you to win the bid on a job, but it can also help you avoid putting up a cash deposit before you work. Many private and public contracts require contractors to be bonded before even being allowed to make a bid.
There are many different types of surety bonds, some of which include:
Bid bonds can be thought of as a pre-approval bond. They guarantee the client that the winning bidder will sign a contract and potentially acquire a performance and payment bond.
Performance and Payment Bonds
These bonds assure that the job will be performed according to the terms within the contract. It may also assure that contractors will pay any subcontractors and vendors in a timely way.
Private surety bonds guarantee a person’s commitment to carrying out a private matter as agreed upon by all parties involved. These may be necessary in cases where a person is assigned executor of a will, trust, or other legal entity.
Public Official Bonds
When public officials are elected or appointed to office, they are expected to perform the duties required of their position. A surety bond ensures you will uphold those expectations for the duration of your term in office.
Fidelity bonds are different from surety bonds. In fact, they work more like insurance for you and your client. A fidelity bond insures the honesty of the people who work for you. If someone commits fraud or theft against you or one of your clients, a fidelity bond can provide compensation for losses. Whether an employee embezzles funds from your business or steals from a client’s home while on the job, you can rest assured that you are covered.
Fidelity bonds may be purchased as blanket bonds that cover all of your employees or as scheduled coverage only for certain employees, such as those with questionable backgrounds. Another type of fidelity bond – the ERISA bond – helps insure payment of employee pension plans. That means that your employee’s retirement benefits program will be solvent even if it was compromised by embezzlement.
Get Bonded in Missouri
If you own a business or are involved in a private matter that requires a bond, contact Mid Rivers Insurance. We will work closely with you to better understand the nature of your business, the risks you face, and your capacity to fulfill the promises you make to your clients. Call us today for more information or to find out if you might qualify for a surety or fidelity bond. We look forward to serving you soon.