Despite popular belief, not all bonds are investment related. Business bonds are similar to insurance in that they guarantee the outcome of a promise. In the event that a promise is broken, the bond will pay off to make sure that the promise is followed through. As a business owner, it is important that you assess the different benefits of the various types of bonds and choose the best for your company.
Most Common Types of Business Bonds:
The two main types of bonds are fidelity bonds and surety bonds. Fidelity bonds act as insurance protection against employee misconduct. You can choose to allow your fidelity bond to cover all of your employees or one specific employee. Surety bonds involve three parties. The “principal” is the party that is required to perform; whereas the “oblige” is the party that is receiving the completed product, and the “suret” is the party that makes sure the principal acts properly. The surety would pay the bond amount to the obliged, in the event that the principal fails to perform as promised.
Types of Surety & Fidelity Bonds:
- Contract Surety Bonds – These are typically for contractors, manufacturers, and suppliers. This is often contractually required to guarantee a level of performance.
- Business Services Fidelity Bonds – This type of bond is for those whose line of duty consists of working on a customer’s property, such as a cleaning service company.
- Fidelity Bonds for Pension Plans – If you have a defined benefit pension plan, you will be required by law to purchase this bond.
At Medwin Insurance Agency, we want to provide you with the peace of mind knowing all of your assets are adequately protected. Contact us today and allow us to guide you through the process of purchasing an adequate business insurance policy. We are always available to answer any questions you may have regarding fidelity and surety bonds.