Why you need to avoid claims at all costs
Why You Must Avoid Claims At All Costs
Bond Claims Will Cost You
There are a few crucial reasons you need to avoid claims on your bond: they can cost you thousands of dollars, destroy your ability to get bonded in the future and damage your professional reputation.
3 Ways Bond Claims Hurt You
#1: You’re Responsible to Pay Claims
Any bond claims you cause will be paid using your corporate and personal assets, which can be as large as the full bond amount (including any legal costs). When bond claims occur, the bond company that wrote your bond will pay them at first. However, they will come back to you for reimbursement. Why? The indemnity agreement that you must sign to get your bond is a legal contract that states you will reimburse the bond company for any claims paid out. It’s unfortunate, but most bond agencies don’t take the time to explain the importance of avoiding bond claims; a quality surety professional will not only educate you, but also act as your first line of defense against claims.
#2: Never Get Bonded Again by Ignoring Claims
Your bond is a guarantee that you’ll pay any claims that you cause. As mentioned above, the bond company who writes your bond will pay claims at first, but will always come back to you for reimbursement. If you neglect to pay bond claims, your bond will be canceled with no refund, and it will be nearly impossible to find a bond company willing to bond you again. There are alternatives to getting a surety bond, but they come with several disadvantages. Find out why losing your ability to get bonded can hurt you and your business.
#3: Your Reputation is At Stake
Neglecting to pay bond claims can also damage your reputation in your industry. If you ignore claims on your bond, you’ll be viewed as someone who operates unprofessionally and doesn’t stick to their word (this can be especially harmful within tightknit industries where companies are familiar with each other). Keep in mind, if you don’t follow through with what your bond guarantees and you harm your clients, it’s unlikely they will stay quiet about it. Not paying claims on your bond can even lead to bankruptcy and legal action depending on the size of your bond claims.
How Do You Avoid Claims?
You’ll just need to ensure you fulfill the obligations of your bond in order to avoid claims. However, there are hundreds of different surety bonds that guarantee a wide variety of obligations, and understanding what your bond guarantees by reading the bond form will be tough if you’re not a surety bond expert. As an MGU, we have the ability to educate and defend you against claims in-house. If you have any doubts or questions about what your bond guarantees you will and will not do, please contact a bond professional.