How to get insured and bonded for a business, different types of business insurance and bonds, including surety, license and fidelity bonds.
Insuring and bonding your business protects you and the business from work-related mistakes and accidents and from problem employees. It may also be required before you can bid on certain types of projects, such as those sponsored by government entities. Properly licensing and bonding your business is the lawful and socially responsible way to operate and isn't that complicated once you understand where to go for quotes and policies.
Determine Your Insurance and Bond Needs
A general business owner's policy offers basic commercial insurance coverage, and it might be all the protection you need for your business. But if you're pursuing government contracts, you might need to have more specialized types of insurance just to be eligible to compete for the contract. Such insurance might include commercial general liability, commercial automobile liability, workers' compensation, product liability and pollution liability. The National Federation of Independent Business can help you determine what insurance you need to protect your business.
A surety bond is a type of insurance that's required by a third party before it will work with you. It protects the third party from any loss you may cause it in the course of doing business. In some instances, businesses that want to procure federal contracts must be surety bonded so that if something happens on the job, the surety bond pays the damage.
Surety bond rates are often based on creditworthiness; if your business has poor or no credit, you may be diverted to a high risk bond program with higher rates. Surety bonds can be provided by insurers or bonding agents that specialize in these types of insurance. The latter may be the more economical way to go, as insurers are often just intermediaries for bonding agents.
License bonds, also known as commercial surety bonds, protect the public from any problems caused on a job. Municipalities typically require contractors to have contractor license bonds.
Fidelity bonds protect your business from loss. Types of fidelity bonds include employee theft/dishonesty bonds, janitorial bonds, and Employee Retirement Income Security Act (ERISA) bonds that protect your employees' benefit plans.
Get quotes for the insurance and bonds you need from multiple commercial insurance brokers and bonding agents before committing to anything so you get the best rates. Insurance and bond rates vary widely, so it pays to shop around.
Ensure your Provider is Reputable
Use your state's directory of licensed insurance providers to check that your chosen agent is reputable and properly licensed.
Execute Your Paperwork
Provide any documentation required by your insurance and bonding agents and execute all required paperwork. Make any payments necessary for your policies and bonds to remain in effect. Keep all insurance and bond paperwork organized so you can produce it as proof of insurance when necessary.
Maintain Your Coverage
Revisit your coverage at least annually to ensure it keeps pace with the growth of your business and remains in compliance with any changes in legal or contracting requirements.