Bonds in Bingham Farms, MI
Accounting for potential losses is an integral part of responsible business planning. Despite your best intentions and most diligent efforts, accidents and circumstances beyond your control may eventually have an adverse impact on your ability to deliver as promised. In such situations, clients and other affected parties may require compensation, at which point having previously secured appropriate bonds may make all the difference.
What Are Bonds?
Typically sold by insurance companies, bonds are a potentially crucial form of financial protection, providing fiscal security and reassurance for parties that enter into business agreements. These products may also be known as surety bonds and bonds insurance.
How Do They Work?
A bond’s exact functionality may vary depending on its type and your insurance company, but they generally entail an agreement between three parties: the principal, the obligee and the surety.
The principal, such as your business, is typically responsible for purchasing bonds in accordance with operational needs and client requirements. The obligee, such as your client, may impose bond-related requirements to secure their own interests. The surety, such as an insurance company, maintains the bonds until the related project or obligation is completed.
If your business commits errors, misses deadlines or otherwise fails to comply with its contractual obligations, the bonds you’ve purchased can be critical. Your client, the obligee, can file a claim, potentially receiving compensation for their losses as they relate to your shortcomings. This can help your company avoid lawsuits that might incur greater losses and adversely impact its reputation and business relationships.
Why Are They Important?
In addition to cultivating financial security for your business and other parties, bonds can also be formally required. For example, governmental bodies and regulatory agencies may mandate that your company be bonded before allowing you to open up shop. Alternatively, clients might require you to retain bonds before awarding you a contract.
We’re Here to Help
Contact Sweet Insurance Agency today to learn more about bonds and address your business’s needs.