As a company, it is essential to ensure all your assets are adequately protected. Excellent customer service is crucial, and everyone strives to deliver exceptional results to clients. However, unforeseen circumstances can occur.
There may be instances where a company fails to fulfill a contractual agreement with a client. In such cases, the company might be required to compensate the client for the incomplete work. Even if the company is not at fault for any delays, they may still have to make payments to the client.
Many businesses opt to purchase surety bonds to safeguard their financial commitments to clients.
What is the purpose of surety bonds?
Surety bonds serve as a form of insurance but differ from standard policies. They primarily protect the promises and contracts made by businesses.
These bonds assure clients of a specific compensation in the event that a company is unable to fulfill its obligations. For example, a surety bond valued at $10,000 will provide that amount to the client.
How do surety bonds benefit both clients and businesses?
Surety bonds offer advantages to both parties involved in the client-business relationship.
They provide protection for businesses that may encounter difficulties in completing their promised work. Similarly, they safeguard clients by covering any incurred costs due to the company’s failure.
It is important to note that surety bond payments differ from standard insurance claim payouts. While a surety bond compensates the client, the contractor carrying the bond is responsible for reimbursing the bond company. This is a key distinction between surety bonds and conventional insurance.
A surety bond guarantees that a contractor will pay the client the specified bond amount. Clients have the option to file a claim on the bond if they believe the work was not executed as promised. The bond company must compensate the client for the bond’s value if the contractor fails to deliver the work correctly and on time. Subsequently, the contractor is obligated to reimburse the bond company.
Acquiring a Bond
Deciding to purchase and maintain a surety bond can be a complex process. Similar to insurance policies, premiums are required to carry these bonds.
Premium costs typically vary depending on the type of bond held. Businesses in high-risk industries can expect higher bond costs. The pricing of bonds usually constitutes a percentage of the total bond value. For instance, a $25,000 bond may cost one percent of its value, equating to a $250 premium.
A certified bond writer can assist you in obtaining adequate bond coverage.
If you are in need of a surety bond, contact Amco Insurance today. We can provide you with a quick bond quote to safeguard your contractual commitments. Visit our website now for a prompt, complimentary quote or call us at 713-771-2626 for further details.
