License and permit bonds reimburse your clients if your business fails to complete a project in accordance with regulations and standards.
Example: A bonded general contractor fails to obtain the necessary permit for building an addition on a client’s home. When the client is fined, the insurer who issued the bond provides reimbursement. The general contractor then pays the insurer the amount of the claim.
License and permit bonds assure clients that your business will comply with local building codes. Violations include improper ventilation, wiring, and failure to install smoke detectors.
Example: An electrician uses wiring that isn’t the right gauge in a client's home. After the project is competed, a building inspector finds the incorrect wiring. The client has to hire another contractor to fix the problem. The bond reimburses the client for the work and the electrician repays the amount of the claim.
If your business is bonded and fails to comply with safety regulations, the insurer can reimburse your client for any resulting fines, replacement work, or other damages.
Example: A bonded general contractor fails to check the location of underground utilities before digging underground and hits a gas line. The client is charged $1,500 for the damage to the gas line. The contractor's insurer reimburses the client $1,500, then the contractor is responsible for paying that amount back to the insurer.
In some professions, commercial bonds are required to ensure that your work meets professional standards.
Example: A bonded notary public notarizes a will for an individual who claims to have left proof of identification at home. It turns out that it was a fraudulent act designed to change the beneficiaries of another person's will. The insurer pays the resulting legal costs and damages; the notary public is responsible for reimbursing the insurer.
General liability insurance protects against the most common third-party (non-employee) claims, which include damage to client property.
Workers’ compensation insurance provides coverage for work-related injuries and illnesses, as well as lawsuits over employee injuries. This policy is required in almost every state for businesses that have employees.