Bonds in Elizabeth, NJ
Your business must account for many risks and exposures to protect its finances. Still, there may be times when other parties’ losses could also impact your fiscal security and stability. With this in mind, appropriate loss control practices must also include measures that can account for your customers and clients.
What Are Bonds?
Bonds may be essential to protect the financial interests of other parties and reduce potential risks and exposures related to such losses. These products are often available through insurance companies and generally provide financial security and reassurance to other parties with whom your organization may enter into business agreements.
Is a Bond Considered Insurance?
Bonds and insurance are not the same. While both financial instruments can provide fiscal security and peace of mind, they have many differences. Generally, bonds are purchased to provide financial protection and reassurance to parties involved in a business agreement or contract. Meanwhile, insurance policies are typically extended agreements that provide coverage over a longer period of time and a broader variety of incidents.
What Do Bonds Cover?
Bonds may come in many forms and their exact coverage may vary significantly. In the United States, the following types of bonds may be commonly required amid business agreements:
Surety bonds—These bonds are generally used to provide financial security and reassurance when two businesses enter into an agreement in which one promises to provide specified services or goods to the other. These arrangements typically include the following three parties:
- The principal, such as a contractor or other business, may be required to purchase surety bonds by the obligee.
- The oblige, such as a project owner or developer, may deem surety bonds necessary to secure their own financial interests.
- The surety, such as an insurance company, may sell bonds to the principal, which can then be used to reimburse the obligee if contractual obligations are not fulfilled.
Fidelity bonds—This type of bond, also known as honesty bonds, is often required by organizations that may expose themselves to potentially criminal or fraudulent acts committed by the employees of other businesses. As such, fidelity bonds may provide financial assistance in the wake of the following:
- Fraudulent transactions
- Property damage
How to Buy Bonds
Bonds can be a complicated and nuanced subject, but retaining the right products may be essential for businesses hoping to alleviate clients’ concerns. Furthermore, many customers may even require certain bonds before allowing bids to be eligible for jobs and projects.
Fortunately, a qualified partner like the UPIX Agency can help organizations understand and acquire appropriate bonds. Contact us today to get started.