For most businesses, insurance will cover losses from any damage caused by their employees, but in some cases, a company will need to be bonded before they’re allowed to operate. Government agencies may require businesses in some industries to carry a bond, while others may be contractually obligated to work with certain clients. As important as surety and indemnity bonds may be, they are also confusing and difficult to understand. Below are answers to common questions about these crucial financial guarantees.

4 FAQs About Bonds

Is a Bond an Insurance Policy?

While surety bonds are related to insurance and often provided by insurance carriers, there are some important differences. A business insurance policy directly pays for damage and other losses, but a bond simply guarantees the company will honor their obligations and will only pay if they fail to do so.

What if a Bonded Company Does Not Fulfill its Obligations?

A bonded company is responsible for paying for their own damages or fulfilling the terms of the contract. If, however, they fail to do so, the organization issuing the bond will cover their obligations and recover their own losses from the company. The law gives bond guarantors a variety of tools to collect these funds, including the ability to file lawsuits and seize assets.

What Do Bonds Guarantee?

While most bonds exist to cover any damage caused by a business’s actions, they can be written to ensure a wide variety of actions. For instance, a bond may guarantee a company will honor the terms of their contract or cover losses related to criminal activity on the part of an employee.

What Type of Bond Do I Need?

Insurance carriers and other providers offer a wide range of bonds designed to meet the needs of businesses in an array of situations. A skilled insurance agent with extensive bond experience will select the best product for your needs, reducing your exposure and ensuring compliance with government regulations.

Since 1890, the independent agents at Mountcastle Insurance have provided the Piedmont Triad, NC, area with high-quality insurance policies and bond products from many of the top carriers in the nation. With their extensive background and expertise, you can rely on their team to help protect your investments from the unexpected. To learn more about commercial bonds and request a quote, visit their website, or call (336) 777-8500.