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Insurance and surety bonds both provide essential financial protections that may be required for specific construction projects or business activities. However, there are key differences in how they function.
The professionals at Integrity Network Insurance Group LLC are experts in surety bonds and insurance and are available to help you secure what your business needs. Contact us today for more information.
What Are Surety Bonds?
A surety bond is a contractual agreement between three parties: the principal, the obligee and the surety. It provides assurances a job will be completed as promised or that certain regulations will be followed.
- The principal is the party who purchases the surety bond that guarantees they will meet certain obligations.
- The obligee is the party who may require the principal to obtain a surety bond. They are also the party who may receive the remedy if a principal does not adhere to the bond’s terms.
- The surety is an entity (e.g., an insurance company) that underwrites the bond and provides a remedy to the obligee if a principal does not fulfill their obligations or duties.
If the principal fails to meet the bond’s terms, an obligee may file a claim against the bond. The principal may have an opportunity to resolve the issue; but if they don’t, the surety company may provide compensation to the obligee. The surety will then seek reimbursement for that payment from the principal.
What Is Bond Insurance?
Like surety bonds, insurance policies are contractual agreements. However, there are only two parties involved: the insurer and the policyholder. The policyholder pays a premium to the insurer, and in exchange, the insurer promises to provide payment if the policy owner experiences a financial loss covered by the policy’s language.
For example, if a business purchases a property insurance policy and sustains property damage by a covered event such as a fire, the insurance company will provide compensation to the business to repair or replace that property. Additionally, if a business purchases a general liability policy and is held responsible for property damage or injury to a third party, insurance will pay for the associated expenses in accordance with the policy.
Do I Need Surety Bonds and Insurance?
Although bonds and insurance are different, both are designed to protect your business from financial loss. They also can help attract and retain clients as they provide peace of mind to your customers that their interests are protected.
Many types of contract surety bonds or commercial surety bonds may be available. Examples include:
- Performance bonds
- Bid bonds
- Maintenance bonds
- Payment bonds
- License and permit bonds
- Examples of insurance coverages include:
- General liability insurance
- Commercial property insurance
- Commercial auto insurance
- Workers’ compensation insurance
Contact Us Today
The team at Integrity Network Insurance Group can help you with both your bond and insurance needs. Contact us today for more information.