Though some successful business transactions only rely on a simple handshake, this is not necessarily the norm. Sometimes a bond is required to ensure an agreement is carried out or to provide additional protection for a agency. Two of the most common types of bonds businesses use are fidelity and surety bonds.
What Are Fidelity and Surety Bonds?
Fidelity bonds insure agencies for employee misconduct, including theft or embezzlement, which is not typically covered by regular San Diego business insurance policies. Surety bonds are more commonly used in the context of construction projects and involve an obligation or task to be performed by the principal for the benefit of an obligee. If the principal fails to perform the specified task, the surety pays the amount of the surety bond to the obligee.
When Does Your Business Need a Fidelity Bond?
Agencies should consider fidelity bonds if they have employees who interact directly with customers, and especially if the employees are regularly working on a customer’s premises or are responsible for handling large sums of money on a daily basis. It is impossible to vet employees against all cases of theft or embezzlement, so fidelity bonds are excellent options to protect against these unfortunate circumstances.
When Does Your Business Need a Surety Bond?
Surety bonds are very common in the construction industry, but they are not just for contractors themselves. Depending on the laws of the jurisdiction where the project is located, contractors, suppliers, and manufacturers may be legally obligated to maintain a surety bond. The amount of a surety bond can vary depending on the scope of the construction project. Parties to a construction contract are often contractually obligated to maintain surety bonds of a certain amount.
Who Should You Contact if You Think You Need a Fidelity or Surety Bond?
Surety bonds and fidelity bonds are very common risk management tools regularly brokered by insurance agents. If you think your business might need either type of bond, contact a San Diego bond insurance agent to discuss your potential coverage needs.
If you have further questions about the type of bond your business might need, reach out to American Tri-Star. We also offer commercial, health, homeowners, and auto insurance San Diego residents trust. Call 619-272-2100 to speak with one of our knowledgeable agents and receive a free quote.