It is important to think about aspects like a contractor license bond and surety bonds when in the business of construction. It is always a fantastic idea to be prepared for various incidents that may happen so that you can continue to operate and move forward with more construction projects.
In the construction sector, it's important to consider risk mitigation and protection. This sector differs from an environment where individuals may be concentrated in an office environment.
While you may be excited about working on future construction-oriented projects, it is best to be aware of what a surety bond company is, the element of workers' compensation, general liability insurance, and general business insurance policies.
If you are interested in learning more about surety bonds, their relation to a surety company, and elements like contractors' insurance, please continue to browse through this brief guide.
A Brief Overview of Construction Bonds
Construction bonds are considered more beneficial to the people working with the Contractor, while the same cannot be said for the Contractor's insurance, as it serves the Contractor more.
Construction bonds assure clients that the company will show up and deliver the goods. At the same time, insurance serves as a guarantee to the construction company that even if something happens, the project's progress will not stop.
For construction companies, it is good to understand that being a bonded company has a certain advantage over just being insured. It's up to the company itself to decide if it wants to enhance its reputation by being bonded or not. However, below are the main differences between the two concepts and how you can use them.
What is Contractor's Insurance?
Contractors have many responsibilities that go along with their job to organize and manage and complete each project. If other parties fail to fulfill their obligations, the Contractor will suffer the most negative consequences. That's why Contractor's insurance is necessary to protect the Contractor in the event of a problem, whether it's with the equipment if a part is damaged, if the supplier fails to meet its obligations, or if incidents occur or the safety and health of employees are put at risk.
Construction insurance includes protection against bodily injury. This policy helps everyone, starting with the Contractor, employees, and anyone else who may be injured. Construction is hard work because it puts health at risk, and proper measures are taken by construction insurance to prevent this from happening.
Another policy included in construction insurance is protection against structural damage. Damage cannot be entirely avoided when working in the construction industry. Therefore, it is important to purchase construction insurance because it allows you to file a claim in cases where your employee has suffered damage or if your employee has unintentionally damaged a client. You will avoid paying additional costs, but you will also have the opportunity to mitigate the damage that has already been done with construction insurance.
Construction insurance can be tailored to the policies you need and the types of coverage required. You can use the Contractor's insurance to pay for damaged property, secure stolen property, protect the construction tools you have, and take care of employee injuries or health problems. In exchange for the fee you pay for the coverage, the insurance party will pay you and insure you in case of problems that could harm your business at incredible rates.
What is a construction bond, and how does it work?
There are different types of construction bonds, and they differ from construction insurance. Construction bonding ensures that both parties are protected from poor performance and careless behavior.
For example, if in the middle of the project someone decides to quit and leaves the job half done, the bond you purchased will allow you, as the owner, to find another employee to do the job so that the project does not fail. In this way, the bond assures you, as the owner, that the project will continue and that you will achieve the expected results.
This is a contract between the company, state or federal authority, and the party who buys the bond. It serves as a message to others, namely your clients, that you are safe and willing to see the project through to completion because of the bond you have purchased. You will only have to pay a percentage of the bond's total value.
Why does a Contractor Need Insurance in addition to a Construction Bond?
Construction insurance is nothing more than a contract between your company and the insurance company. If something goes wrong, the insurance company will pay for you. However, this does not guarantee the customers' safety, as they will know that you are not responsible since even if something goes wrong, someone else will pay for you, which will not encourage you to do the job properly. Insurance helps the owner personally guarantee that if something unexpected happens and things go wrong, there will be another party to ensure that the project will not be interrupted and will continue in the same manner as before.
However, if a contractor is bonded, if a claim is made about a job not being done properly, and if the investigation shows that the company did not follow the rules, they will have to pay the costs. Knowing that in fraud or lack of commitment, bonded companies will have to pay the costs of the claim themselves creates a certain amount of confidence in customers. It gives them a sense that this bonded company is the one that must cooperate.
For this reason, construction companies must understand that purchasing these bonds, even if it comes at some cost, gives them a better reputation and helps them gain and keep customers. Bonded construction companies are considered trustworthy and are in higher demand, whereas insurance does not guarantee such a position.
Work with the Thumann Insurance Firm Today For Your Insurance Needs
Not being an expert in the field sometimes penalizes us for not understanding the difference between concepts that seem very similar to the public eye. However, we have relayed the differences between a contractor's insurance and a construction bond through this simple guide.
If you are looking for assistance with contractor insurance for your contracting business, find out how our team at the Thumann Agency can help with our knowledge, expertise, and experience in the insurance sector. We have worked with construction contractors and a wide variety of clients on general liability, workers' compensation policies, professional liability, and many more policies.
If you want to obtain an insurance policy for your business, reach out to our insurance agency today. We are here to help you protect your business. Call us at 972.991.9100 to request a free quote.