Bonds in Springdale, AR
As a business owner, you must account for many risks and exposures. After all, even a single accident or error could have far-reaching financial ramifications. The consequences of incidents and other issues could be particularly damaging if your shortcomings impact the finances of other parties, such as clients and customers. Fortunately, bonds can provide critical financial security for all parties involved in various business dealings.
What Can Bonds Do for My Business?
Bonds are financial instruments generally purchased from insurance companies that can provide financial security and reassurance for other parties with whom you conduct business. While the exact purposes and capabilities of bonds may vary, they are generally intended to ensure clients and customers can recoup financial losses for accidents, errors or other issues for which your business is at fault.
Do I Need Bonds for My Business?
Your organization may often be required to purchase and maintain certain bonds for various jobs and projects. You may even be obligated to do so in many cases before being eligible to bid on work. Even without any requirements, bonds are an advisable investment, as they can ensure your clients’ peace of mind and financial security while limiting your company’s potential losses and reputational risks.
What Is the Difference Between Surety Bonds and Fidelity Bonds?
Two common types of bonds among U.S. employers and business dealings are surety bonds and fidelity bonds. The following guidance may help your organization understand these potentially critical arrangements:
- Surety bonds are often used to reassure clients and customers regarding goods or services your business agrees to provide. These arrangements typically involve the following three parties:
- The principal (e.g., your business) purchases surety bonds if required to do so by the obligee.
- The obligee (e.g., your client or customer) determines if surety bonds are necessary for a given job or project.
- The surety (e.g., an insurance company) underwrites and maintains bonds purchased by the principal.
If your business cannot deliver on promised goods or services, the surety bonds you’ve purchased can compensate the obligee for their losses. The surety may then seek repayment from the principal.
- Fidelity bonds, also known as honesty bonds, may provide financial assistance and peace of mind for customers and clients regarding criminal, fraudulent or dishonest acts that may be committed by your employees and from which they could accrue losses, such as the following:
- Property damage
- Fraudulent transactions
- Illicit fund transfers
We’re Here to Help
At Variety Insurance Agency, our knowledgeable team is well-equipped to help your business understand and address its bond-related needs. Contact us today to get started.