Insurance Bonding Explained
Bonding insurance is designed to guarantee the security of working with a service provider. Many service providers such as housekeepers, landscapers and construction personnel purport to be "bonded" but very few consumers actually know what that means. Bonding is a form of insurance that allows homeowners and other consumers to act with relative certainty that their investment is protected.
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Significance
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Bonding insurance is carried by most types of workers who have close contact with the personal property of a client. In the case of maid services or housekeepers, who often have access to large amounts of personal property, the bonding service guarantees that, if the bonded person is convicted of theft, the bonding company will pay the amount stolen directly to the aggrieved party. After the payment is made, it's the responsibility of the bonding company to exact payment from the bonded employee.
Identification
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Bonded employees are typically issued a card to show that they are, indeed, bonded. Typically this card will have the information of the bond company, so that you, the client, can verify that the bond is active and in good standing. Typically, bonding companies are large and affiliated with major insurance companies, and are easy to research and investigate. If, however, someone purports to hold a bond from a company that is little-known, it would not be unreasonable for you to ask for paperwork outlining the terms of the bond.
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Benefits
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A bonded contractor has the ability to get more and higher-paying jobs than those who are not. Because the bond guarantees payment in the event of theft or, in some cases, lack of job completion, a client is more likely to choose a bonded worker than one who is not. Especially if you are using contractors for work in which there is valuable property easily at hand, knowing that your valuables are at least partially protected from theft is a major selling point.
Effects
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In effect, carrying a bond as a contract worker shows that you are willing to prove that you are trustworthy. Not only that, but it also shows that you are willing to invest in the security of your business. Bonds are not cheap and they are not to be entered into lightly, because all a bond company needs to begin collection procedures is a court ruling of fault on the part of the business owner. That means that a business is responsible for not only its own actions but the actions of its employees. That is a strong financial incentive for someone who holds a bond to ensure that his employees are trustworthy.
Warning
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Hiring a bonded contractor is no guarantee of payment. Bonding companies are required to pay their bond only if a legal authority, such as a court of law, finds that the bondholder is at fault for a loss. Also, the terms of each bond can vary widely, so ask for specific documentation regarding the terms of a contractor's bond at the time of hiring. Anyone claiming to be bonded should be willing to provide this information with no hassle.
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