Contractor Bond Insurance – A Helpful Overview
What is contractor bond insurance? This type of insurance is a way of protecting contractors against a loss, and can be implemented against an instance of dishonesty or fraud. Contractors who invest in this type of bond are referred to as being “Bonded.”
This is especially true for companies that have after hour workers. Or, for contractors that work late at night. Most often, these types of people are cleaning services. Or, they can also be like armored bank cars that deliver large amounts of cash to banks. People with these types of high risk jobs are considered bonded and must be insured this way.
Having contractor bond insurance reduces the financial risk for the client. Companies or employers may be required by law to put this type of insurance into effect. They pay a premium rate to an insurer that is known as a bonding company. A customer can file a claim against the company if an employee does his job incorrectly and the consumer suffers a loss.
Such professions that need to be bonded are contractors, janitors, companies that provide temp personnel and businesses that use government contracts.
So, what does it take to get a bond?
Getting contractor bond insurance is obtained by contacting your local bonding agency. They will discuss your needs and coverage for your personnel that require a bond. Risks will be examined by them, and afterwards they will give you a premium quote.
The same risks however exist with bond insurance just like regular insurance policies. They sometimes only cover specific events. If something occurs other than what the policy is written for, the bonding agency can refuse to pay that bond out. Make sure you know what your coverage entails before signing it.
So what is the cost of contractor bond insurance? Well, it varies greatly. Mostly it depends on the type of work your business conducts and what risk your workers are at. Janitors that work the night shift in empty building are at risk for mugging or theft. Armored cash cars are at risk for hold-ups and possible death for demanding of the cash. A general rule is that sometimes premium rates are between a quarter of a percent and three percent of the value of the bond.
What the actual costs of the bonds are will be dependant once again on the risks taken by your business, and it will also depend on the nature of the needed bond.