Understanding Bonds and Why They Matter

Many responsible businesses must take ample steps to protect their financial interests and those of their clients and customers. If your company is regularly relied on to provide services or professional guidance to other parties, your loss control measures must account for potential errors. With this in mind, understanding and securing appropriate bonds is essential.

What Are Bonds and Why Are They Important?

Bonds are a common loss control instrument often sold by insurance companies. These products may come in many forms but generally serve the purpose of financially protecting the interests of parties that enter into formal business agreements with one another. The inherent financial security provided by bonds can help clients recoup financial losses for which you may be at fault without having to pursue costly and potentially public lawsuits. Due to the financial security and peace of mind provided by bonds, many clients may impose requirements before your company may even be eligible to bid on a job or contract.

What Types of Bonds Are There?

There are many types of bonds, as well as many subcategories, but two of the most common forms include the following:

• Surety bonds—After your business purchases surety bonds, typically from an insurance company, they provide a means for your client to recoup losses should you prove unable to fulfill your contractual obligations.

• Fidelity bonds—Also known as honesty bonds, these products can help compensate other parties for losses arising from criminal or fraudulent acts committed by your employees, such as theft, forgery or property damage.

We’re Here to Help

At The Hammer Agency, we’re ready to help you reinforce your financial stability by identifying and procuring the right bonds. Visit our website or call one of our offices in Littleton and Denver today to learn more.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.