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Bonded and Insured

Do you need to be bonded, insured, or both? It's a common source of confusion, and while it's totally understandable to mix these two up, it's also vitally important to understand the difference. Read on for an easy explanation of everything.

Bonded and Insured Definition

Seemingly similar, bonds and insurance policies are actually not the same product. In the case of insurance, the policyholder may file a claim against the policy seeking financial compensation. Insurance involves two parties (the insurer and the insured) and works to protect the policyholder.

There are three parties involved with surety bonds: the principal (bonded party), the obligee (bond beneficiary) and the surety (bond issuer). Obligees may file claims against the bond seeking financial compensation if they believe the principal has broken the terms of an agreement. Unlike insurance, the bonded party gets penalized for claims.

When you hear someone use the phrase "bonded and insured," it typically means they have both in accordance with the law. Contractors, for instance, often must have both insurance and a bond to operate legally. Local, state, and federal governments often mandate that certain types of professionals and businesses have bonds backing them. Similarly, many contractual agreements between private entities incorporate bond requirements as well.

The Difference Between Bonded and Insured

There are many details that differ between being bonded and being insured. The beneficiary is the most important one for understanding how these two seemingly similar forms of risk protection work. As noted above, insurance policies protect the policyholder – you get policies to protect yourself from risk that pay you when you suffer damages. All surety bonds types do the opposite – they protect someone else from risk by paying them for damages you cause. As such, surety bonds and insurance policies are often required together because they complement one another to protect broadly against risk.

How to Get Bonded & Insured

In most cases, getting bonded and insured means working with two separate companies. For the bonding half, count on Viking Bond Service to make the process simple and straightforward. Before you get started, consider the different kinds of bonds you may need.

  • License & Permit – Necessary for getting a professional license or project permit.
  • Construction – Necessary before proceeding with a contracted construction project.
  • Commercial Bonds – Necessary for opening and operating many kinds of businesses.
  • Contract Bonds – Necessary for sealing a contractual agreement.
  • Court Bonds – Necessary for compelling the court to hear certain types of cases.

Who Must Be Bonded and Insured?

More people than you might expect. Any interaction between two parties that creates risk for one of those parties might involve a surety bond requirement, an insurance requirement, or both. Since it's mandatory to obtain these two forms of coverage in advance and illegal to conduct business without either, it's essential to understand any and all requirements you face to be bonded and insured.

These requirements vary across states, but counties and municipalities can (and many do) also have rules to be bonded and insured. There is much information online about state and local bond requirements in each state for specific professions. To find the most current guidelines about being bonded and insured, reach out to the public agencies that regulate the industry you operate in. After you contact them, choose Viking Bond Service, so we can help you obtain any of the bonds you require.

How to Get a Surety Bond

Before learning how, consider when. Bonds exist for a reason: to make one party feel more confident about committing to a formal arrangement with another. Therefore, when bonds are required, they must be in place before anything else proceeds. If one of those requirements applies to you, find a surety able to issue a bond ASAP – there's no benefit to waiting.

When you're ready to apply, you will need to complete a standard bond application. Expect questions about your finances and background.

Depending on what kind of surety bond you require, the surety may ask for additional documentation or sometimes even collateral. Underwriters at the surety will use all that information to quote you a price for the bond premium. Premiums are typically a small percentage of the bond value, meaning for a $100,000 bond, you may only pay a few thousand dollars depending on your credit. After paying, the surety will give you documentation to prove you have the required bond.

How to Stay Bonded and Insured

In most cases, someone required to be bonded and insured must maintain coverage for as long as they remain in business. If either coverage lapses for any reason, it complicates the ability to perform business and puts an entire career in jeopardy, so it's important to avoid loss of coverage at all costs.

Surety bonds and insurance policies both have coverage terms, meaning a time limit the coverage remains active, after which they expire unless renewed. Thus, it's an obligation for anyone who must be bonded and insured to keep on top of renewals. The easiest way to manage this is to make this part of the standard business planning by tracking the dates and budgeting for the costs.

Just as important will be avoiding claims against either the surety bond or the insurance policy, and, in the case of surety bonds, settling those claims immediately rather than relying on the surety to settle. Claims can quickly lead to loss of coverage, especially unpaid claims. Likewise, a spotty record makes it harder to get bonds or policies in the future. As much as possible, strive to avoid any situation that could result in claims.

Apply to Get Bonded

Ready to get a bond of your own? Viking Bond Service, a nationwide surety broker, makes it easy. Complete our online bond application at any time, and expect to get a quote in under 24 hours. For more information, contact us or call 1-888-2-SURETY (1-888-278-7389).

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