Bonds

Businesses of all sizes and across all sectors may have significant risks and exposures for which they must account. Regardless of precautions or preparations, certain incidents and accidents may have a detrimental impact on your ability to function as expected, potentially leading to client grievances and losses. In these situations, your company will likely appreciate having previously established appropriate loss control measures, such as bonds.

What Are Bonds?

Not to be confused with savings bonds purchased as financial investments, bonds in the insurance industry refer to loss control tools that can limit fiscal losses arising from your business’s shortcomings or errors. The exact functionality of these measures may vary, but they are generally intended to foster a means of compensation for other parties (e.g., clients and the general public) should your business fail to adhere to contractual obligations or industry standards.

Types of Bonds

Bonds may come in many forms, but two of the most commonly utilized among U.S. businesses include the following:

• Surety bonds include many subclassifications, such as contract and performance bonds. These tools establish a legal agreement between the following three parties:

• The principal, such as your business

• The obligee, such as your client

• The surety, such as your insurance company

The obligee can determine if surety bonds are necessary to protect their interests. If so, they typically require the principal to do so. Should the principal eventually prove incapable of delivering on their business obligations, the surety can pay out the bonds, limiting losses while avoiding a need for lawsuits.

• Fidelity bonds are also known as honesty bonds and can be integral in financially protecting you and your clients from illicit, criminal, fraudulent or dishonest acts committed by employees and contract workers. Should a client accrue losses due to the following incidents, fidelity bonds may provide financial assistance:

• Theft

• Burglary

• Property damage

• Forgery

• Fraudulent transfer of funds

We’re Here for You

Contact South Sound Insurance in Auburn, Washington, today to learn more about bonds and ensure you have proper loss control measures in place.