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Me By JeremyWyatt
The Crucial Difference Between Typical Commercial Insurance and Surety Bonds The Difference Is in the Fine Print
In these situations, the insurance company acts as your ally. They are there to serve your best interest and offer protection against financial consequences should something go wrong in relation to the project.
From time to time, clients ask me, “What is the difference between more traditional commercial insurance and surety bonds?” There is often uncertainty or misunderstanding as to the difference. At a glance, there are many similarities. Ultimately, they are both helpful in advancing your interests; however, misunderstanding the difference can be costly.
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Surety Bonds
Surety bonds are insurance products sold by many of the insurers that we buy other forms of insurance from, including auto and CGL policies. Similarly, they help mitigate risk, but they do it in a different way. Every construction project comes with its share of risk. Something may go wrong — such as a subcontractor going out of business in the middle of the job, making it difficult to complete the project in the expected time frame. Or maybe the client doesn’t complete the work or doesn’t pay employees, suppliers, or other subcontractors the money they are owed. If the general contractor or owner has a surety bond, they can call the insurance company that issued the bond to take care of the situation.
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Commercial General Liability (CGL) Insurance
This is a type of policy that is generally activated if you do something potentially negligent on a construction project. The insurance company steps in to indemnify you or protect you from financial harm. It’s the same general idea that applies to auto insurance. If, by chance, someone was driving poorly or not paying attention to the road ahead and rear-ended someone, their auto insurance policy would protect them from monetary damage. It may even provide the policyholder with an attorney, if necessary.
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jwyatt@harrisonlawgroup.com
www.HarrisonLawGroup.com
(410) 832-0000
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