How (And Why) to Get Bonded and Insured
The term “bonded and insured” is used quite often when it comes to construction and contracting businesses, but not everyone knows what it means.
The “insured” portion refers to the typical coverages required by a construction business to carry, such as workers’ compensation and builders risk insurance. The “bonded” portion is unique to construction industries because it involves a three-party contract that extends beyond the typical insurer/insured relationship.
The surety bond is an agreement made between the following:
- The oblige (the client) – The recipient of the work
- The principal (the contractor) – The person who performs the work
- The surety (insurance company) – The party that reassures the client that the contractor can perform the work assigned
The Surety Bond at Work
You perform some plumbing work on the property, but over the winter, the pipes burst during the cold snap. The client hires a plumber to assess the situation, in which it’s discovered that the placement of some of the piping violates code and is the reason behind the pipes freezing. The client makes a claim on your bond to cover the cost of repairs. The insurance company pays the client, and then you reimburse the insurance company for the amount paid out.
The Benefits of Surety Bonds
While it’s not required that you be bonded, doing so builds trust with current and potential clients. Since insurance carriers are not required to do business with anyone, choosing to bond with you is a sign to clients that you are professional, qualified, and don’t have an extensive claims history that will cause insurance carriers to drop you because you’re too much of a liability.
License or Permit Bonds: A Pre-cursor to Work
Being bonded also opens doors to more contracts and allows you to get licenses and permits needed to operate legally. A lot of states require a license or permit bond before you can obtain a permit to perform work on a property. Being bonded acts as a gatekeeper before local governments are willing to issue you a license to legally do business.
No matter how you look at it, being bonded is pretty much the way to go. To learn about getting bond insurance, call John Quinn at 617-612-6533 or request an appointment below:
John began working at H&K Insurance in September 2017. With over 30 years’ experience in the insurance industry, John Quinn is armed with the knowledge and experience to fit your unique needs. He specializes in writing comprehensive insurance policies for general contractors, landscapers, and restaurant owners. Keeping your interests at the forefront of his mind, John works with insurance companies to create policies that fit the philosophy and scope of your business. Affordable and detailed are two traits that aptly describe the policies he writes. In his spare time, he enjoys taking trips to the Cape and volunteering at his local animal shelter.
