The business world is captivating but can be overwhelming. It is overwhelming because you may be on the wrong side of the spectrum if you are dealing with a business that is not insured or bonded. In this article, I will be showing you how to know if a business is insured and bonded.
To know if a business is bonded or insured, you can do any of the following:
- Ask the business to provide you with a certificate of insurance
- Seek bonded papers of a business from an insurance company
Knowing the insurance and bonded status of a business is quintessential to ensuring you do not deal with a business that is not certified.
In this course of this article, I will explain in details how to know if a business is insured and bonded, why it is necessary to know the status of businesses, including other questions relating to this piece of information.
How to know if a Business is insured and bonded
Beginning with insurance, to know if a business is insured, have the business’s insurance agent send you a Certificate of Insurance (COI). The Certificate of Insurance is a proof that the business has secured an insurance policy.
The reason why you should have an insurance agent send you a company’s certificate of insurance (COI) is for the purpose of credibility and trust. A business can easily manipulate the details of the existence of an insurance policy. Moreover, no insurance broker or agent would put their job or company in a bad light by falsifying details of the existence of an insurance policy.
Through the COI, you are sure the business has insurance and is worth every deal or investment you may want to execute.
Furthermore, you should be aware the types of insurance policies a business should have. This is important so that when you are presented with a certificate of insurance by the business’s insurance agent, you are sure they have the right policies that worth dealing with them.
Insurance Policies Every Business Should Have
Some of the insurance policies that every business should have included:
- Professional liability insurance
- Property insurance
- Workers’ compensation insurance
- Business interruption insurance
- Product liability insurance
- Vehicle insurance
There are more insurance policies that are designed to insure businesses but the aforementioned are core insurance policies every business ought to have.
As someone looking to work with a business or become an employee, you should be sure the business has professional liability insurance, workers’ compensation insurance, business insurance, and product liability insurance.
The professional liability insurance (sometimes referred to as Errors & Omissions insurance) is an insurance policy that covers a business from liabilities resulting from claims of negligence and underperformance. If a business fails to deliver on its promises and objectives, they can get sued. It is this insurance policy that protects them from claims arising from such issues.
Another scenario is in trying to use a product from a company. Where there is no product liability insurance, you can deduce that the company is not serious about legal issues that may arise from the use of their products. In many regards, every business, no matter the size or industry ought to have insurance policies in place.
Knowing that a business is insured is not enough. There is need to verify if the business is on course to paying premiums and other insurance fees. Also make sure the insurance company presenting the Certificate of Insurance is a credible one that offers comprehensive insurance coverage and is swift with claims resolution.
With that said, let’s see how to know if a business is bonded.
To know if a business is bonded, you would have to demand proof from an insurance company. It is similar to knowing if a business is insured, however bonding is a different concept from insurance and demanding the proof of bonding from a third party agent is the best way to know if a business is bonded.
According to embroker.com, a bonded business is one that has purchased a surety bond which typically represents an agreement between three parties. These three parties include the principal, the obligee, and the surety.
The principal is the company or business purchasing the bond. The obligee is the party who requires the bond before allowing the principal to carry out its business activities. The surety on the other hand is the insurance company issuing the bond.
This brings us back to insurance companies. They are the ones issuing the bond – the surety. Hence, to know if a business is bonded, you will need to request the bonded status of a business directly from the insurance company.
It is essential to verify if a business is bonded because it protects you as you hire the business against any possible losses that may arise from the impact of damage, theft, incomplete work, and any other failure from the business you are hiring. Even though it is similar to insurance, in essence, bonding is an insurance product and operates in the same manner as one.
If a damage truly occurs, one can file a claim and receive compensations from the surety – the insurance provider which the business is expected to repay. The major difference between a bonds and insurance is that for the former, claims are made to the insurance company that issued the bond while in the latter claims are made to the company or business.
A good business to work with would be one that is both bonded and insured. It gives prospective clients and customers a sense of security. In addition, they help create the needed trust between business and client which is integral to the sustainability of your company’s operations. You would be protecting your reputation if your business is bonded and do not meet your client’s expectation.
Nobody would be comfortable working with a company they know is not secure. Everyone wants to make sure they are investing their money in the right ventures not on businesses that could go bankrupt when a case is filed against them. If you are a business owner, ensure your business is both bonded and insured.
How Much Does it Cost to be Insured and Bonded?
The cost of getting insured will vary depending on the type of business, level of security, business operations, and much more. Certain insurance companies offer cheap business insurance policies which incorporates a significant percentage of the demands of insurance for businesses.
For bonding, the cost is dependent on the conditions of the bonding contract. When you want to secure bonds, your business’s credit score and finances are taken into consideration. Business with a good credit score can expect to pay below 5 percent of the bond cost while others with poor credit scores can see bond costs rising to more than 20 percent.
What does it Mean When a Company is insured and bonded?
We say a company is insured when it has the right business insurance policies. The company will be tagged bonded, if it has secured surety bonds from an insurance company that guarantees the security of third party that would work with them.
Basically, the idea behind being insured and bonded is to have secured insurance policies for the smooth running of your business and surety bonds to ensure customer satisfaction.
Is Being Bonded the Same as Being Insured?
No. Being bonded does not mean a company is insured. A company can be bonded and not insured because bonding refers to the purchase of surety bonds which would see an insurance company pay a grieved customer over claims of a business failing to meet their expectation. However, insurance is where the company pays clients for a wide spectrum of events covered by the policies they have got.
It is easy to get both insurance and bonding wrong. And this is because they both offer a form of financial leverage for companies. Nonetheless, they are different.
Most business owners tend to overlook the place of bonding and insurance. They downplay this important necessity to their detriment. The business world is getting competitive daily and if you must have an edge over others, you must take steps they are not willing to take. One of such steps is to get your business bonded and insured.
Suppose you find two options for a business to invest in, Company A and Company B. Company A is both insured and bonded while Company B has no proof of bonding and its insurance policies look too shallow. Which of these companies would you invest in?
I am sure you would invest in Company A and it is because it is bonded and insured. As a business owner, do not be like the owner of Company B in my analogy. Get insured and bonded today.
As more and more of us are venturing into the business world, it is important to intimate ourselves with the steps on how to know if a business is insured or bonded. With this article, I am confident you can detect if a business is insured and bonded or not.
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