Is being insured the same as being bonded?
Disclaimer: I am not an insurance agent. What I’m sharing with you in this blog is based on my experience and research and is unique to the work I did before. Not every business needs to be insured, so contact your insurance agent if you have questions or need information or verification. My business is also bonded and insured, so if you want me to refer you to someone, reach out to me, I would be happy to share some information with you.
When hiring a bookkeeper or outsourcing a bookkeeping service company, it’s essential to ensure that they’re bonded and insured. It shows the legitimacy of the service they offer with their business. But what is being insured, and what is being bonded? Is being insured the same as being bonded? When outsourcing a Bookkeeping Company, what is the difference between hiring an Insured Company vs. a Bonded Company? Or are there none at all? This blog discusses all you need to know about being insured and bonded and its differences, including examples to further our understanding of the topic.
Insured vs. Bonded
It’s been thrown around for quite a bit, and some people think being insured is the same as being bonded.
To be insured. It means to transfer any number of risks to a third party through an insurance product. For example, you have a car, and you’re insured; that means that you transfer any trouble that might occur to you to a third party, which in this case is your insurance company. Your car is insured depending on your insurance package, so an accident that’ll happen is covered. So if you accidentally had a bad car accident, you decide based on your deductible and file a claim.
Another example would be of a construction company where the general contractor and the supplier are both insured. So let’s say, during a project for a client’s roof, while delivering the shingles using a crane, unfortunately, it somehow dropped the roofing product through the top and also did some damage to the client’s home’s interior. In that case, who takes the liability to fix the client’s roof? Is it the supplier who is responsible for that or the general contractor? Once they figure that out, they file their insurance claim, and the insurance company will cover that because when you give a quote to do a roof, you don’t have a quote to fix any damages. So that’s an extra thing, and that’s what the insurance covers.
To be bonded. A bonded business has purchased a surety bond. A surety bond represents an agreement between three parties:
- The Principal– is the company that purchases the bond that will be providing its services to others.
- The Obligee– is the party that requires the bond before permitting the Principal to do business, usually a state or municipal institution.
- The Surety– is the insurance company that issues the bond.
As a quick example, we’ll have a general contractor, a municipal institution school, and an insurance company: a construction company is hired by a school to add roofing to the building. In this case, for the construction company to be hired by the school, it has to make sure that it is bonded. So, the construction company is the Principal, which purchases the bond, and the Obligee is the school that requires the bond, and the Surety is the insurance company that issues the bond.
Now how does this work? Surety bonds protect the third party so that if the Principal, for whatever reason, couldn’t finish the job or there’s damage or theft, then the Obligee can go to the Surety to file a claim and be able to get covered. The insurance company will then go to the Principal, the construction company, and the Principal must repay the Obligee’s claim.
The Main Difference Between Insurance and Bonds
The main difference is that insurance protects the business from losses, while the bond protects the client who has hired the business for a specific job or project. So, what is a client’s perception when it comes to a bonded and insured company?
When a company is insured, it gives a sense of financial security and financial stability for a client. When a background check has to be done, it shows that they’re financially stable. Clients want to know that when they sign up and do work with a company, it’s not going to turn around, and all of a sudden have a lawsuit, and next thing you know, it is filing for bankruptcy. Insurance, as mentioned, shows financial security and financial stability for a client.
Being bonded helps create trust between your business and your clients. You are assuring them that they will be financially protected from losses they may suffer if you don’t fulfill your contractual obligations to them completely. There’s a backup plan if something doesn’t go right. Being also bonded protects not only the client but also protects your business. Believe it or not, the reason why it protects you is that it also protects your reputation if you’re unable to finish a job. So let’s say something happened and you couldn’t finish a job, at least your reputation is protected as well.
Conclusion
To protect the parties involved, each plays the role that requires them to fulfill their obligations to assure each other that they’ll indeed complete it. Being bonded and insured gives a sense of security that the work that will be provided and done will be seen through to the end and that no complications regarding the partnership will arise. As a bonded and insured company, Nave Bookkeeping does just that, so you can rest assured that your financials are always safe with us. If you have any questions or want more information, contact us on our Facebook page, Nave Bookkeeping, LLC, or visit our website website anytime.
Is being insured the same as being bonded?
Disclaimer: I am not an insurance agent. What I’m sharing with you in this blog is based on my experience and research and is unique to the work I did before. Not every business needs to be insured, so contact your insurance agent if you have questions or need information or verification. My business is also bonded and insured, so if you want me to refer you to someone, reach out to me, I would be happy to share some information with you.
When hiring a bookkeeper or outsourcing a bookkeeping service company, it’s essential to ensure that they’re bonded and insured. It shows the legitimacy of the service they offer with their business. But what is being insured, and what is being bonded? Is being insured the same as being bonded? When outsourcing a Bookkeeping Company, what is the difference between hiring an Insured Company vs. a Bonded Company? Or are there none at all? This blog discusses all you need to know about being insured and bonded and its differences, including examples to further our understanding of the topic.
Insured vs. Bonded
It’s been thrown around for quite a bit, and some people think being insured is the same as being bonded.
To be insured. It means to transfer any number of risks to a third party through an insurance product. For example, you have a car, and you’re insured; that means that you transfer any trouble that might occur to you to a third party, which in this case is your insurance company. Your car is insured depending on your insurance package, so an accident that’ll happen is covered. So if you accidentally had a bad car accident, you decide based on your deductible and file a claim.
Another example would be of a construction company where the general contractor and the supplier are both insured. So let’s say, during a project for a client’s roof, while delivering the shingles using a crane, unfortunately, it somehow dropped the roofing product through the top and also did some damage to the client’s home’s interior. In that case, who takes the liability to fix the client’s roof? Is it the supplier who is responsible for that or the general contractor? Once they figure that out, they file their insurance claim, and the insurance company will cover that because when you give a quote to do a roof, you don’t have a quote to fix any damages. So that’s an extra thing, and that’s what the insurance covers.
To be bonded. A bonded business has purchased a surety bond. A surety bond represents an agreement between three parties:
- The Principal– is the company that purchases the bond that will be providing its services to others.
- The Obligee– is the party that requires the bond before permitting the Principal to do business, usually a state or municipal institution.
- The Surety– is the insurance company that issues the bond.
As a quick example, we’ll have a general contractor, a municipal institution school, and an insurance company: a construction company is hired by a school to add roofing to the building. In this case, for the construction company to be hired by the school, it has to make sure that it is bonded. So, the construction company is the Principal, which purchases the bond, and the Obligee is the school that requires the bond, and the Surety is the insurance company that issues the bond.
Now how does this work? Surety bonds protect the third party so that if the Principal, for whatever reason, couldn’t finish the job or there’s damage or theft, then the Obligee can go to the Surety to file a claim and be able to get covered. The insurance company will then go to the Principal, the construction company, and the Principal must repay the Obligee’s claim.
The Main Difference Between Insurance and Bonds
The main difference is that insurance protects the business from losses, while the bond protects the client who has hired the business for a specific job or project. So, what is a client’s perception when it comes to a bonded and insured company?
When a company is insured, it gives a sense of financial security and financial stability for a client. When a background check has to be done, it shows that they’re financially stable. Clients want to know that when they sign up and do work with a company, it’s not going to turn around, and all of a sudden have a lawsuit, and next thing you know, it is filing for bankruptcy. Insurance, as mentioned, shows financial security and financial stability for a client.
Being bonded helps create trust between your business and your clients. You are assuring them that they will be financially protected from losses they may suffer if you don’t fulfill your contractual obligations to them completely. There’s a backup plan if something doesn’t go right. Being also bonded protects not only the client but also protects your business. Believe it or not, the reason why it protects you is that it also protects your reputation if you’re unable to finish a job. So let’s say something happened and you couldn’t finish a job, at least your reputation is protected as well.
Conclusion
To protect the parties involved, each plays the role that requires them to fulfill their obligations to assure each other that they’ll indeed complete it. Being bonded and insured gives a sense of security that the work that will be provided and done will be seen through to the end and that no complications regarding the partnership will arise. As a bonded and insured company, Nave Bookkeeping does just that, so you can rest assured that your financials are always safe with us. If you have any questions or want more information, contact us on our Facebook page, Nave Bookkeeping, LLC, or visit our website website anytime.
Is being insured the same as being bonded?
Disclaimer: I am not an insurance agent. What I’m sharing with you in this blog is based on my experience and research and is unique to the work I did before. Not every business needs to be insured, so contact your insurance agent if you have questions or need information or verification. My business is also bonded and insured, so if you want me to refer you to someone, reach out to me, I would be happy to share some information with you.
When hiring a bookkeeper or outsourcing a bookkeeping service company, it’s essential to ensure that they’re bonded and insured. It shows the legitimacy of the service they offer with their business. But what is being insured, and what is being bonded? Is being insured the same as being bonded? When outsourcing a Bookkeeping Company, what is the difference between hiring an Insured Company vs. a Bonded Company? Or are there none at all? This blog discusses all you need to know about being insured and bonded and its differences, including examples to further our understanding of the topic.
Insured vs. Bonded
It’s been thrown around for quite a bit, and some people think being insured is the same as being bonded.
To be insured. It means to transfer any number of risks to a third party through an insurance product. For example, you have a car, and you’re insured; that means that you transfer any trouble that might occur to you to a third party, which in this case is your insurance company. Your car is insured depending on your insurance package, so an accident that’ll happen is covered. So if you accidentally had a bad car accident, you decide based on your deductible and file a claim.
Another example would be of a construction company where the general contractor and the supplier are both insured. So let’s say, during a project for a client’s roof, while delivering the shingles using a crane, unfortunately, it somehow dropped the roofing product through the top and also did some damage to the client’s home’s interior. In that case, who takes the liability to fix the client’s roof? Is it the supplier who is responsible for that or the general contractor? Once they figure that out, they file their insurance claim, and the insurance company will cover that because when you give a quote to do a roof, you don’t have a quote to fix any damages. So that’s an extra thing, and that’s what the insurance covers.
To be bonded. A bonded business has purchased a surety bond. A surety bond represents an agreement between three parties:
- The Principal– is the company that purchases the bond that will be providing its services to others.
- The Obligee– is the party that requires the bond before permitting the Principal to do business, usually a state or municipal institution.
- The Surety– is the insurance company that issues the bond.
As a quick example, we’ll have a general contractor, a municipal institution school, and an insurance company: a construction company is hired by a school to add roofing to the building. In this case, for the construction company to be hired by the school, it has to make sure that it is bonded. So, the construction company is the Principal, which purchases the bond, and the Obligee is the school that requires the bond, and the Surety is the insurance company that issues the bond.
Now how does this work? Surety bonds protect the third party so that if the Principal, for whatever reason, couldn’t finish the job or there’s damage or theft, then the Obligee can go to the Surety to file a claim and be able to get covered. The insurance company will then go to the Principal, the construction company, and the Principal must repay the Obligee’s claim.
The Main Difference Between Insurance and Bonds
The main difference is that insurance protects the business from losses, while the bond protects the client who has hired the business for a specific job or project. So, what is a client’s perception when it comes to a bonded and insured company?
When a company is insured, it gives a sense of financial security and financial stability for a client. When a background check has to be done, it shows that they’re financially stable. Clients want to know that when they sign up and do work with a company, it’s not going to turn around, and all of a sudden have a lawsuit, and next thing you know, it is filing for bankruptcy. Insurance, as mentioned, shows financial security and financial stability for a client.
Being bonded helps create trust between your business and your clients. You are assuring them that they will be financially protected from losses they may suffer if you don’t fulfill your contractual obligations to them completely. There’s a backup plan if something doesn’t go right. Being also bonded protects not only the client but also protects your business. Believe it or not, the reason why it protects you is that it also protects your reputation if you’re unable to finish a job. So let’s say something happened and you couldn’t finish a job, at least your reputation is protected as well.
Conclusion
To protect the parties involved, each plays the role that requires them to fulfill their obligations to assure each other that they’ll indeed complete it. Being bonded and insured gives a sense of security that the work that will be provided and done will be seen through to the end and that no complications regarding the partnership will arise. As a bonded and insured company, Nave Bookkeeping does just that, so you can rest assured that your financials are always safe with us. If you have any questions or want more information, contact us on our Facebook page, Nave Bookkeeping, LLC, or visit our website website anytime.
