Grand Mutual Insurance Services (GMIS) offers a range of commercial insurance policies to ensure that each business has the coverage it needs to operate successfully and protect itself from liability. One unique yet vital form of coverage, provided as needed to clients in select industries, is the insurance bond. This form of insurance, unlike other policies, doesn’t benefit the policyholder; rather, it covers a third party in the event the policyholder is unable to fulfill its obligations and/or pay for goods provided/services rendered.
Contractor bonds are one of the most common bond options. Some states require contractors to purchase this form of insurance; however, even in states where it is not required, companies looking to hire contractors may require contractors to have this insurance bond before bidding on a project or starting work on it. Contractor bonds guarantee that a contractor will do the work as agreed on in the contract. If a contractor makes a mistake, cuts corners, uses bad judgment, or falls behind on the project, the insurance bond covers the company that hired the contractor so that the company does not have to pay for damage the contractor caused to the project. A contractor bond can cover a range of incidents, including improper waste disposal, use of the wrong materials, unprofessional conduct, or damage caused to public or private properties due to contractor mistakes or malfeasance. Contractor bonds also cover instances when a contractor may shut down unexpectedly, before completing an agreed-upon project, providing compensation for the company that hired the contractor to enable it to find a new contractor for the project. Other insurance policies that can be purchased along with a contractor bond include builder’s risk, product liability, and environmental liability coverage.
There are also insurance bonds covering commercial transportation, some of which are required by state and/or federal laws. Trucks carrying a gross weight of more than 80,000 pounds, a single axle weight of more than 20,000 pounds, or a tandem axle weight of more than 34,000 pounds, for instance, will need an overweight highway permit bond in many states. This bond is designed to ensure the heavy load is transported safely and will cover the costs of repairs to any road structures, pavements, and/or bridges that may be damaged while the load is transported. Moving companies need a surety bond in many states to provide compensation to customers if some or all of a customer’s possessions are lost and/or damaged in transport. School bus companies need a surety bond with a compensation level equal to the contract signed with the school system. These bonds can be purchased as stand-alone coverage or in conjunction with a GMIS commercial auto policy.
While these are some of the most common insurance bond options, they are by no means the only ones. Elected officials, appointed officials, mortgage brokers, vehicle dealerships, gas stations, and liquor stores also need surety bonds in order to do business and/or fulfill their obligations to voters. More than one bond may be required, especially for companies or entrepreneurs that do business in more than one state. Individuals or companies providing a service or product that may require bonding should talk with an experienced insurance bond provider such as GMIS to find out which type of coverage would best meet the need and learn about options for bundling coverage to keep costs low.
Sources
Nine Clients That WILL Ask You About Surety Bonds – Propeller (propellerbonds.com)
4 Bonds Required to Ship Goods (suretybondsdirect.com)
Grand Mutual Insurance | Los Angeles Insurance Agency
What Is a Contractor Bond? (generalcontractorlicenseguide.com)
