Having business insurance and bonds can help safeguard a small business.
A business insurance policy protects your business from financial losses after unexpected problems—and clients sometimes want to work only with companies that have business insurance. Depending on the industry you work in, you may also need to buy bonds before clients will hire you. For example, construction businesses typically purchase a bond before working with a client.
“Insured” simply means you have purchased business liability insurance. Small business insurance can help with everything from physical losses like a fire to lawsuits.
Let’s look at the details of a general liability insurance policy, a popular small business policy:
Are you a small business owner? Clients might require that you have a business liability policy before doing business with you. You want to be able to tell your customers you are “insured” and ready to do business.
“Bonded” means that you have purchased a surety bond to protect your business against claims of shoddy, incomplete work, or allegations of theft and fraud. A surety bond has three parties:
Bonds cover claims of negligence in the workplace. For example, let’s say a construction contractor buys a bond at the request of a client. If the work is shoddy and ultimately goes unfinished, the obligee could file a claim with the surety company for the cost of hiring another contractor to finish the project properly.
Here are three different types of common bonds:
Having both insurance and a bond can give customers confidence that your business is legitimate and that they won’t be left holding a large bill if you fail in your work. Plus, many large clients require business partners to have general liability insurance and bonds.
Without the right bonds you may not get business from certain people. And without insurance you’ll end up paying for liability claims and property damage out of your own pocket.
Source – Forbes.com