Surety Bonds vs. Insurance

plumbing-840835_960_720-2I remember a story of a plumber losing their bond to a client that had their water heater pipes worked on by him. The plumber did not put a simple o-ring on a pipe he was replacing and ended up causing massive water damage to the inner walls of the house! The bond was paid out, the plumber was extremely distraught, and became even more so when he received a call from the bond company about how he was going to pay them back! If he had a General Liability plan with a Plumber’s Liability policy attached, he would have only paid his deductible and the client probably would not have made a claim on his bond!

The advantage to bonds is that they can really help customers feel at ease when working with you—and depending on your business may be required by law. But you must construction-2578410_960_720consider that if a claim is made against a bond and paid out to the claimant, the bond company will pay the person making the claim and then will turn around and ask you to pay them right back! This is different than General Liability since Surety Bonds do not protect your company and work against accidents or property damage like insurance coverage would, bonds are only are paid out when a legitimate claim is made against them!

Bonds are a very useful tool and are sometimes required by law depending on the business—but if you have the choice between a bond and insurance, it is wise to consider both sides of the coin!

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