Insurance Policy or Bond: Understanding the Difference
These days, small business owners have a lot to worry about, like thinking about how to stand out in the market and how to bring in more customers. The last thing that any business owner wants to worry about is financial loss due to an accident or unplanned event. It is very important that all business owners have both a commercial insurance policy and a bond in place. Here we will discuss the difference between the two:
First, the definitions of a Commercial Insurance Policy and a Bond:
Commercial Insurance Policy: Insurance for your business is a form of protection. Basically, in the event of a loss, the insurance company will be responsible for paying the damage. Just like car insurance, business insurance varies from company to company.
Bond: A bond is a form of protection, not for your business, but for your customers in case you cannot fulfill your requirements as their provider. In many industries, taking out a bond is required.
Here are three differences between insurance and bonds for businesses:
Who is in charge of paying?
With a commercial insurance policy, the business owner pays a monthly rate for coverage. If the owner experiences a loss or damage to his or her insured property, the insurance company is responsible for paying for the damages without any expectation of repayment.
The story is a little different when dealing with bonds. A bond broker offers a backup or a guarantee to the customers of a business on behalf of the business owner. This guarantee promises that any contracted work will be completed. If for some reason the work commitment is broken, the customer can collect his or her losses through the bond. After the bond company pays the customer for their losses, the broker will require the business owner pay them back.
How many people are involved?
In a contract with an insurance company, only two sides are involved, the insured business owner and the insurance provider.
With bonds, there are three sides involved. The business, the customer, and the bond company. In general, customers feel much more secure knowing that a bond is in place which insures completion of the work they are paying for.
Which should you buy?
Thinking from the viewpoint of a business owner, the power of having coverage for your company and for your clients will help you focus on the day-to-day tasks of the business. Having commercial insurance and a bond for your businesses will give you the protection you need so that you can focus on the most important thing: the operation of your business. Commercial insurance and bonds allow you two different levels of protection, and in an unpredictable world, possessing both can save you from a headache.
Think about it thoroughly. Even though it may not seem like the best use of your money up front, it can prevent you from financial loss or ruin later down the line.
Make sure you have the best coverage for your small business. To get a quote, call an Infinity agent at 1-800-INFINITY or get a quote online today!
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