The term “bonded and insured” is used a lot if you own a business. Some business owners wonder what the difference between being insured and have a surety bond is. While most people think they are the same thing because the phrase is used together often, they are completely separate things. Here are some differences between being bonded and being insured:
Contract: Insurance helps you manage the risks. These contracts are between the policyholder and the insurer, which essentially “guarantees” that the insured will receive compensation from the company if a loss occurs. This will happen as long as it is under the policy contract.
Three parties: These contract include at least the following three parties; the “surety” or “guarantor” (an insurance company), the principal (a second party that promises to do the work), and the “obligee” (a third-party for whom the work is to be done.)
Type of protection: The purpose of insurance is to protect an insured business against risks, where a surety bond provides protection for the obligees of the bond. Here is an example, your business hires a bonded contractor to expand your office space and the contractor does not fulfill their agreed-upon terms that the contract stated, the surety bond would then pay you, the business owner – the obligee.
Premiums: These premiums are paid to cover potential loss. The premium paid for a bond is for guaranteeing that the person performing the work will fulfill the contract.
Let Brazelton Insurance Group help make sure your business is bonded and insured before you sign your next contract. We are committed to making sure you and your business are cared for. Contact us today.