As a small business owner it is important for you to understand the difference between a surety bond and a general liability insurance policy. Many people mistakenly assume that a surety bond is a substitute for a general liability policy. In reality, the two are substantially different. A surety bond is basically a guarantee that your company will complete all its contractual obligations in a timely and legally compliant manner. A bond is a financial instrument that is designed to compensate your customers for any financial damage they might suffer in the event that your company fails to complete a contracted job or project. With a surety bond, the bonding company agrees to pay a claim made against you by a customer on the condition that you pay the money back with interest later. The monthly premiums that are paid towards a bond arrangement are typically considered as service fees.
A general liability insurance policy on the other hand protects your company against financial losses stemming from an accident, property damage, equipment loss, medical expenses and costs associated with lawsuits and other legal claims filed against your company for any reason. The monthly premiums you pay will depend entirely on the amount of insurance that you purchase, the type of risks that are covered, the nature of your business and various other factors. The amount of coverage available under a general liability policy is usually much larger than the amount available under a surety bond. Often, it is a good idea to purchase both a surety bond and a general liability policy to ensure total protection and legal compliance with state regulatory requirements.
If you would like to learn more about general liability and surety bonds or would like to get a quote for either, please contact the insurance specialists at Lou Aggetta Insurance in Pleasant Hill, California.