Does your business rely on employees to provide a service to customers? If so, you may benefit from having a business service bond. This blog post will cover how this type of surety bond works, and why many small businesses consider it an important asset.
What is a Business Service Bond?
Not to be confused with an employee dishonesty bond, a business service surety bond protects your company in the event that one or your employees steals money, securities, or personal property from a customer of your company. The easiest way to explain these surety bonds is with an example. Imagine you run a cleaning company. While one of your cleaners is inside a customer’s home, they steal some jewelry. After reporting the crime and going through the proper normal legal process, the customer may seek recompense from the cleaning company whose employee committed the crime. The cleaning company can claim on their business service surety bond to recoup the value of that jewelry and cover themselves for the loss caused by their employee’s crime.
How does a Business Service Bond work?
A company may file a claim for damages against their business services policy if one of their employees has stolen from their customer. If the company’s employee has been found guilty of the theft, the surety company that issues the bond will pay a settlement to cover the full value of the stolen goods, up to the coverage amount to cover the company’s liability. In contrast to normal surety bonds, Business Services bonds are insurance policies. The protection provided is for the benefit of the policy holder.
If My License Requires a Bond, Is a Business Services Bond Right For Me?
Business services bonds ARE NOT license bonds. If your business needs a license and needs a surety bond as part of the license requirements, a business services bond WILL NOT suffice. It will not affect your licensure in any way whether you do or don’t have a business services bond. However, for businesses that need licenses and therefore need to hold themselves to a high standard, it may be worthwhile to obtain a business services bond in addition to the licensure bond. Viking Bond Service can help with either, or both.
What is the purpose of a Business Service Surety Bond?
Unlike many other types of surety bonds, bonds for business services aren’t required. Businesses obtain them voluntarily as a way to establish trust with customers. People feel more comfortable working with a bonded business because the surety bond protects the customer from the risk of loss due to employee theft. Businesses with one of these bonds often mention that fact in advertisements and marketing materials as a way to set themselves apart from the competition and put new customers at ease.
Who needs a Business Service Surety Bond?
Business service bonds aren’t required for any business in any state. That being said, they are common for businesses in a number of industries: appliance repair, security, pest control, pool cleaning, painting, landscaping, elder and child care, and many more. Almost any business whose employees work directly with or on their business customers property or assets could potentially benefit from having a business service bond. When trust matters, surety bonds help a lot.
Who are the parties involved in a Business Service Bond?
The bonded business is one of the two parties involved:
- Principal – The business that obtains the surety bond is known as the principal. The principal may claim on the policy to cover losses caused by their emplyee’s criminal action against a customer of the business.
- Surety – The company that issues and backs the surety bond. The surety guarantees payment for valid claims to the principal.
How to get a Business Service Surety Bond?
If you’ve decided a business service bond could help your business build trust and attract customers, you’re committing to a sound small business strategy. The good news is that one of these bonds doesn’t have to be confusing to obtain or expensive to pay for.
The first step is to apply with a quality surety agency like Viking Bond Service. You will need to supply some basic information about your business, including the type of work you perform and the number of people you employ.
Based on your application information, the surety will quote you a price for the premium. Expect to pay a small percentage of the bond’s total value based on how much coverage you select on your application.
Business services policies expire typically after 12 months but longer coverage terms may be available. To keep your policy active, you will need to renew the coverage by updating the surety about your current employee count and any known relevant legal issues your employees may be involved in. Your bond premium may go up or down annually based on changes to your business size.