As a service or product provider, your entire business model hinges upon fulfilling contracts. Your obligations go both ways — to the suppliers you need to pay for the materials they equip your production line with, and customers who count on your products and services. These are basic contracts of business that you need to meet and protect to preserve valued partnerships and secure your reputation as a reliable contractor. But how do you follow through on outstanding obligations in case of a massive business interruption?

Does My Company Need Bonds?

Unfortunately, despite the best of intentions unforeseen circumstances and losses can prevent you from fulfilling contractual obligations. A natural disaster or economic downturn in Atlantic Canada can easily hamper operations and impact profit, making it hard to pay suppliers and continue production to follow through on paid orders. For these, your business needs bonds or financial reserves to guarantee remaining obligations. If your company responds to large commercial RFPs or government contracts, having bonding in place is required to successfully bid on projects.

Build Trust

Being bonded is primarily for customer protection — it assures customers of their money back in case contracted work cannot be completed. Think of a bond as an added guarantee to your client, vouching for the credibility of your business and providing peace of mind to your clients that your company is following all laws and legislation related to your area of operations. Even before your business enters into a contract, a bond agreement in place communicates trust, reliability, and transparency — all signs of a commitment to quality work and customer service. These indicate a record of following through on contractual obligations, a commitment to keep customers happy and fully compensated in case of failure to deliver.

As for your business, a bond helps provide financial stability in case a dissatisfied customer makes a claim against your business. The required compensation or settlement would be paid out from the bond, effectively shielding your business from further losses.

How Is A Surety Bond Enforced?

A surety bond is a three-way contract that involves your business, a customer who contracted work to be performed, and a surety company:

  • Principal: this is your business, which has been contracted to provide a service or supply a product, and who purchased the bond for financial guarantee
  • Obligee: the customer who contracted a service and has already tendered at least partial payment, or will suffer losses if the principal cannot fulfil the contracted work
  • Surety: a trusted insurance company that issues and guarantees the bond, and will be responsible for compensating the affected customer based on the specified limits of the agreement.

Who Needs A Surety Bond?

A surety bond is a necessary investment for businesses in Nova Scotia and New Brunswick, who provide services and trade on their reputation for excellent customer service. It is a secure alternative to a letter of credit and guarantees the financial stability of businesses in construction, transportation, telecommunications, energy, and other industries. Surety bonds also cover various bonds such as contract, bid, performance or labour and material payment, supply, license and permit, and judicial bonds.

Ask Our Brokers

At Archway Insurance, our brokers are here to help protect your business from the fallout of contractual obligations that cannot be fulfilled. We understand that extraordinary circumstances prevent you from providing quality work and service that your customers count on. And with our bonding agreements, you won’t lose a customer or valued partnership in the fallout. Our insurance brokers will equip you with necessary bonds and guarantee the compensation of affected parties to ensure the financial and operational stability of your business.

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