What you need to know about the process of getting bonded.
As a small business owner, you may have seen the term "bonded" when you are working with contractors or third-party service providers. If you are trying to launch your own service-based business, then you may need to secure bonds as well.
But what does getting bonded entail, and are bonds different than commercial insurance in Los Angeles, California? Here's what you need to know.
What is Bonding?
A bond is designed to protect consumers from the harmful, unethical, or poor business practices from service-based companies. If the business makes a mistake while rendering their professional services, then the customer can file a claim against the company. If the claim is valid, then the company's bond will offer compensation for the customer's damages or losses.
Types of Bonds
There are two main types of bonds:
- Fidelity Bonds- These types of bonds compliment business insurance policies because they provide protection for both customers and the business itself. Fidelity bonds protect against theft, misconduct, or fraud perpetrated by the company's employees. For instance, if a business is hired to complete work in a customer's home, and an employee steals something, then the business's fidelity bond will cover the cost of the theft. In this case, the bond protects the customer from having to replace the stolen item and protects the business because it is not held directly liable for the employee's actions.
- Surety Bonds- These types of bonds offer customers a guarantee that services will be provided as agreed. To illustrate how surety bonds work, imagine that a construction company needs to purchase a bond as required by the state they are operating in. The company is hired to build a new shed for a customer. However, the construction company fails to build the shed according to code and must be redone. In this case, the customer would file a claim with the surety company. If the claim is valid, then the surety will pay for the customer's additional construction work with funds from the company's bond.
Who Needs to Be Bonded?
There are certain types of businesses that are required to be bonded by state or municipality laws. Even if your state does not require you to be bonded, you should consider securing this protection if your business often works in customers' homes or on other business properties. It's important to understand that bonds are a great way to protect your company from dissatisfied customers and make your company seem more reliable. So, securing this coverage is a great way to simultaneously protect your business's financial stability and improve your company's image and reputation.
This is what you need to know about getting bonded. Want another way to protect your company? If so, then contact the experts at Fuller Insurance Agency in Southern California. We are ready to assist you with your
commercial insurance in Los Angeles, California today.
