Bonds insurance is a critical type of coverage for any business owner because it guarantees your customers payment if you fail to meet conditions laid out within the terms of the contract. Having bonds insurance can be a huge benefit for growing your customer base because it provides peace of mind to your customers that they will be paid even if you fail to live up to your terms of the deal. Surety bonds are not to be concerned with professional liability insurance because they safeguard third-party companies and not yourself from mistakes.
Bond insurance can be confusing so let’s define a few of the key terms:
- Principal: The business that purchases the bond is known as the principal.
- Obligee: The customer or company that hires your business is known as the obligee. The bond protects the obligee from any fraudulent work that the principal causes.
- Surety Company: The financial organization that is selling the bond to your business (principal). If you do not meet the terms and conditions within your contract to the obligee, the surety company will need to do a payout.
Bond insurance guarantees that your business will fulfill the contract terms with failure resulting in a claim being made with the surety company to recover losses. At Allen Jones Insurance Agency in Seguin, TX we understand that bond insurance can be confusing. We encourage you to give us a call to speak with one of our knowledgeable insurance professionals who can walk you through the ins and outs of bond insurance. At the end of the call, we’ll help you decide if bond insurance is right for your business.