Many people do not know the difference between being insured and being licensed and bonded. While both terms are forms of financial guarantee, they mean different things. Licenses and bonding are designed specially to protect businesses and their customers in the event of accidents, disasters, or errors. When a business says it is bonded, this should not be confused with having an insurance backup. Businesses that claim to be surety bond insured or bonded insured are also not to be confused for one another. To help you understand these terms better, below are some of the things you should know.
What is Insurance?
Insurance is a policy or an agreement that is entered into between a customer and an insurance company, agent, or underwriter. The purpose of an insurance policy is to protect the client from the full financial weight of future disasters. There are different kinds of insurance products and coverage options. Basically, the idea is that a business assesses its risks and buys insurance products that offer coverage for those risks. When disasters happen, the insurance company is notified, and they help out financially as agreed in the contract.
A private individual can take different insurance policies, including homeowners, renters, auto, health, life insurance, etc. Businesses can also take general liability insurance, workers’ compensation insurance, auto insurance, business insurance, etc.
What is Bond Insurance?
Bond insurance offers a higher level of coverage and protection against unforeseen circumstances. In this case, the bond issuer buys a bond that guarantees that they will repay the amount owed and any related interest payment in the event of a default. The bond also covers repayment if one or more of the contract terms aren’t met. Businesses that purchase bonds use this to improve their credit rating while also providing a guarantee for coverage of damages and claims.
What Does it Mean When a Business is Bonded?
A business can be bonded in many ways. Some of the options to choose from include;
Surety Bonds
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