Suppose you want to build a storefront for a new commercial business. You find a great contractor for the job. Without warning, they disappear, leaving you high and dry. What do you do?
For starters, you won’t have to worry if the contractor has a surety bond. What’s a surety bond? It’s a lifesaver at times like this.
You won’t have to cancel your storefront construction or push back the grand opening. You’ll have the resources to find another experienced (and reliable) contractor more quickly.
There are more benefits to these bonds than commercial building projects. Learn how surety bonds work, and discover even more advantages.
What Is a Surety Bond in Plain English?
Let’s forget the financial jargon.
A surety bond is a type of insurance that involves three people (or parties). Insurance is protection from loss. You can transfer the risk of potential loss to an insurance company through an insurance policy.
Typically, a surety bond contract would include you, the person you’re doing business with, and an insurance company. Companies can also enter surety bond contracts with each other.
In financial terms, you are the obligee because you need a guarantee that a job will get done. The professional you hired is the principal because they’re obligated to you. The insurance company is the “surety” because they’re guaranteeing that the job will get done.
If the job doesn’t get done, you can file a claim with the principal’s insurance company to compensate you for your financial loss.
Can just anyone file a surety bond claim for a botch job?
How to File a Surety Bond Claim
You must have a surety bond contract with another party to file a claim. This is why having surety contracts upfront is so important when you’re a business owner.
When writing your claim, be as specific as possible. Gather plenty of evidence to prove that the other party didn’t meet their contractual obligations. You don’t want to give insurance companies any reason to deny your claims.
If your claim is approved, the principal’s insurance company may award you a partial or full settlement. This is where things get complicated. If the settlement is too low, you may have to hire a lawyer.
Negotiating for a higher settlement is different if you’ve never done it before, especially with an insurance company. It’s best to leave that part to the pros.
What to Do If Your Surety Bond Claim Is Denied
If your claim is denied, don’t wait to act. Learn about surety bonds thoroughly. You may have missed something in the contract, which triggered the denial.
Most importantly, don’t give up! Find legal help right away. Talk to any friends or family members who are familiar with the law.
Many lawyers offer free consultations. Find a lawyer that specializes in insurance claims. Learn whether your not you have a case and how to proceed when you do.
Learn More About Surety Bond Insurance
What is a surety bond? Something you don’t want to be without. Protect your future projects with a surety bond contract.
Learn more about this important insurance policy and other financial fundamentals. Check back for more lifestyle tips, tricks, and hacks for your busy life.