Your business is your passion and your livelihood. Without it, how would you support your family? What would your employees do to financially sustain their families?
It’s crucial to think about this, since the business landscape is ripe with danger. Lawsuits threaten your continued operations — and with business liability insurance, you may not have all the protections your business needs to overcome a lawsuit.
Fortunately, there is another way to safeguard your livelihood. Surety bonds provide protections Commercial General Liability insurance misses.
Surety Bond Protections
If your business works with contracts and contractors to complete projects, then you know how risky the process can be for your company’s brand and profits. Poor performance, misaligned scopes and missed budget estimations all threaten your company’s financial standing. Unfortunately, if you or a contractor performs poorly, Liability Insurance will likely not cover court settlements and damages. However, surety bonds may protect you from risks surrounding contracts.
Understanding Surety Bonds
Surety bonds are valuable for businesses that use contracts regularly. With a surety bond, you can reduce the chances of contract default. There are three parties involved in surety bonds:
- The Surety Company is the company providing the surety bond.
- The Obligee is the organization or person entering a contract with the contractor.
- The Principal is the organization or person responsible for completing the work.
Typically, surety companies are insurance companies or other types of financial institutions.
Contractors purchase surety bonds from surety companies. Surety companies base rates for bonds on the contractor’s ability to meet the requirements of the contract. In turn, the surety company issues a guarantee that the contractor is capable of completing the contract; otherwise, the obligee may receive payment from the surety company.
Does Your Company Need a Surety Bond?
Determining whether your company benefits from purchasing a surety bond is simple. You should purchase a surety bond if your business relies heavily on profits from contracts. In this instance, surety bonds protect business profits by increasing the likelihood that contractors are performing the work based on contract requirements.
Owning a business requires that you protect it from a host of unknowns that threaten the existence of your business. Liability Insurance is a great start to securing your business, but to have comprehensive protection, consider purchasing a surety bond when performing work for a contract.
Ensure your business’ protection. Call Garrett Insurance at 830-896-6600 for more information on Texas surety bonds.