Commercial bonds are a step beyond standard liability insurance, giving your customers and government agencies peace of mind and protecting you against expensive claims. Companies in some industries are required to purchase a bond in some states, but another company may make partnerships and contracts conditional on being bonded. Below are answers to some common questions you might have about these arrangements.

What to Know About Commercial Bonds

How do commercial bonds work?

A bond is a three-party agreement between you, the principal, the other business or government agency, known as the obligee, and the surety company. If you fail to fulfill your contractual obligations or deliver an expected level of service, the surety will compensate the obligee or any losses.

Do I need a bond if I have liability insurance?

Liability insurance provides valuable protection for business owners and customers alike, but it doesn’t cover the same situations as a bond. For instance, bonds pay obligees if the principal fails to complete their portion of a project, throwing off the entire schedule and causing significant losses, which wouldn’t be covered by an insurance policy.

What happens if the obligee files a claim with the surety?

Unlike insurance, which transfers risk to the insurance company, commercial bonds keep the risk with the principal. If the obligee files a claim, the surety will expect you to fully reimburse them for any damages they’ve had to pay.

What affects the cost of a bond?

Insurance companies weigh a variety of factors when deciding premium rates and how much bond credit to issue. Along with your claims history and personal credit score, they may also evaluate the capabilities of your business, qualifications and licenses, and how many years you’ve been operating.
 

As one of the few insurance companies in San Marcos, TX, that offers commercial bonds, Integrity Insurance Solutions provides guarantees and peace of mind to businesses throughout the area. They work with only the most dependable, reputable carriers in the industry, and will take the time to find a bond suited to your needs and budget. Visit their website for an overview of their services, get more tips and advice on Twitter, or call (512) 396-2211 to request a free quote today.