Bonds Quote Forms
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All businesses must account for various risks and exposures to safeguard their finances against losses. However, in many cases, you may also need to secure loss control measures on behalf of other parties, such as your clients and customers. These parties depend on your company to deliver reliable and consistent products and services; even slight miscalculations or errors could have significant consequences. With this in mind, your organization may need to purchase bonds.
What Are Bonds?
Bonds are a type of loss control instrument that may help parties with whom you work to secure their financial interests. If your organization is unable to deliver promised services or complete them in accordance with contractual obligations, appropriate bonds may insulate you and your clients from financial consequences while also potentially sparing your reputation.
What Is the Difference Between Bonds and Insurance Policies?
Insurance policies and bonds can provide essential financial security for businesses, but they are not the same. While insurance policies are typically ongoing arrangements paid for in regular installments, bonds are typically purchased to provide financial reassurance between your business and a third party for a specific job or project.
What Is a Surety Bond?
Surety bonds are among the most commonly utilized types of bonds in the United States. These arrangements typically entail a financial agreement between the following three parties:
If a principal is unable to fulfill their obligations, the obligee can be compensated through the surety bonds. The surety may then seek to recoup costs from the principal.
What Are the Different Types of Bonds?
There are several types of bonds, including many varieties of surety bonds. Still, while there may be many subcategories, surety bonds can typically be classified as one of the following:
- The principal—This party, such as a business or contractor, purchases surety bonds if required to do so by the obligee.
- The obligee—This party, such as a developer or property owner, determines if the principal is required to purchase bonds.
- The surety—This party, such as an insurance agent or broker, underwrites and maintains surety bonds.
Fidelity bonds are another type of bond often retained by U.S. businesses and employers. These arrangements, also known as honesty bonds, generally provide financial protection from losses arising due to your workforce engaging in criminal or fraudulent activities that impact your clients or customers, such as the following:
- Commercial surety bonds
- Contract surety bonds
- Fidelity surety bonds
- Court surety bonds
Get the Right Coverage
With nearly 20 years of service to businesses, families and individuals in Philadelphia and throughout Pennsylvania, the dedicated staff at Dorsey & Associates LLC has the knowledge and experience needed to help your organization and its clients secure financial interests. Contact us today to learn more about bonds.
- Property damage
- Fraudulent transactions
- Illicit fund transfers