In the state of California, you need to get a surety bond for your company depending on the type of business you are in. Surety bonds are one of the oldest types of insurance out there, but they aren’t exactly what we now think of as insurance. A bond in California, like this one, is actually more of a reverse insurance policy, one that protects the consumer more than it protects the principal, which is how it is different than our traditional thoughts of insurance. What does this mean for you? It means if you are running a business in California, you may need both a surety bond and insurance in order to operate legally.
The Real Difference Between Insurance and a Surety Bond
When you choose to buy commercial insurance for your business, it essentially helps to protect you from getting sued, protects your business and employees from harm and injury and can also help to protect you should something happen to a customer on your property, such as a fall. Depending on the type of business you have, you will need different endorsements, as to ensure proper protection.
With a surety bond, however, there are no endorsements that you buy in order to protect your company and it does nothing to protect your business. What it does do, however, is to protect the consumer in the case of fraud or other type of situation. Different bonds can do different things and depending on your business, you may need one type of bond over another.
Other Differences Between Insurance and Surety Bonds
There are other differences between insurance bond and surety bonds, as well. For instance, you will find that with insurance, you will pay a deductable and then the insurance company will cover the rest in the event of a claim up to the limit of the policy. You have the choice, in most cases, of choosing a higher deductible in order to pay a lower premium. With surety bonds, however, you don’t have that option…you pay the price you pay and if the bond is used, you will still have to pay back the difference to the broker. Fortunately, they are in place for a reason and this doesn’t happen often.
