Before your contractor project kicks off, you will need to do your best to have the perfect protection in place. You need to think about protecting yourself against lawsuits, as well as against certain unpredictable situations and things that could go wrong all of a sudden. There is certainly no doubt in my mind that you get how significant it really is for a contractor to get adequately protected.
Even though you might get the importance of that, there are probably some things that are confusing you here. For instance, you may be confused about the concepts of contractor bonds and insurance. Those are two different concepts and you might not be able to figure out what it is that you really need. And, of course, you do not want to invest your money in one thing only to realize afterward that you should have invested it in the other thing.
Well, in order not to let that happen, you will need to understand the difference between bonding and insurance and practically get all your facts straight before making any concrete moves toward getting one of these two types of protection. Learning more about both of these concepts will undoubtedly lead you towards figuring out what your next steps should be. So, if you’re ready to learn, and I’m sure you are, let us start explaining these concepts one at a time.
Table of Contents
What Is A Contractor Bond?
A contractor bond is there to protect both the contractor and the project owner. Provided by a third party, this bond serves as a means of ensuring that both the project owner and the contractor will stick to the agreement. If you, as the contractor, fail to complete the work in accordance with those terms and conditions that you have agreed upon, the project owner will be properly protected through this bond.
On the other hand, if the project gets derailed for one reason or another, the bond will prevent the contractor from suffering any serious financial losses. So, in short, they get peace of mind when it comes to the finances. Based on the scope of the entire project, you might actually be required to get this bond, but this is something that you should always check.
What Is Contractor Insurance?
If it is now clear to you what those bonds are, and I hope it is, because I’ve given you a simple explanation that definitely isn’t going to confuse you, it is time for us to move on toward checking out the second significant concept. I am, of course, referring to the concept of contractor insurance. This is actually a broad term that encompasses various commercial insurance products.
The main difference to remember is that the insurance actually protects your company as a whole, beyond the actual project that you are working on at this point. It protects you against third-party lawsuits. In case you decide not to get this insurance, you will be responsible for covering any of those claims from your own pocket, which can certainly deal a significant financial blow to your overall company.
It is also worth remembering that there is no one-size-fits all solution when it comes to contractor insurance. To say it differently, when getting the insurance, you will need to work closely with the provider to come up with a policy that works best for your specific business. Of course, finding the right provider also plays a major role in the quality of the coverage you will get, so make sure to remember that as well.
This should help you figure out if you need bonds or insurance: https://fitsmallbusiness.com/bonded-vs-insured/
Which One Do You Need?
Since you now understand both of those concepts and know how they differ, you are probably wondering which one of them is actually right for you. Well, this is a question that only you can answer for yourself, but here’s something you should know. Getting insured is important in the broad sense and you should definitely not disregard the necessity of doing that. Bonding, however, might be required in certain projects, which means that you could easily end up using both of these protection options in some cases. Anyhow, they will both certainly come in handy.