Having a permit bond is important when operating a business. Permit bonds protect your customers in the event you do not fulfill your obligations within a contract. In some states, depending on the type of business you have, you cannot operate without being properly bonded. It is important to remember that being insured does not mean you are bonded. This is a surprising fact that many are not aware of. You may be wondering what’s the difference because both of them cover losses in the event something happens.
The main difference between the two is the parties the contract is protecting. In terms of insurance, the contract is protecting the business in the case of loss or damage. A bond is there to protect the consumer in case the business cannot meet the obligations included in a contract. Permit Bonds in Arizona are typically needed by some entities or government agencies to protect their interests. To understand the benefit of being both bonded and insured, one must understand how they are actually different.
Key Difference Between Permit Bonds and Insurance
1. Insurance is typically a contract between two parties; the business and the insurer. On the other hand, permit bonds are contracts between three separate parties: the business, the consumer, and the company that issued the bond.
2. As previously stated, permit bonds are to protect your customers in case you cannot fulfill your obligations and to ensure you follow proper rules and regulations. Some may even require you be bonded before allowing you to bid on contracts.
3. A major difference, and often a common misconception, is that bonds pay for the losses the same way that insurance policies do. Bonds do cover damages incurred by your clients due to your negligence, but you must repay all those damages. In essence, bonds are similar to credit lines. Because of this fact, some bond companies may require certain criteria be met before qualifying for a permit bond.
Becoming a company that is insured and bonded opens your business up to operate more freely and gain more customers. Having a good relationship with your bonding company can help build your reputation and allow you to be seen as a reliable and trusted business. Contact Southwest Bond Services today for more information regarding permit bonds in Arizona.