What Is A Surety bond?

What Is A Surety bond?

A surety bond is a contractual agreement that involves three parties, namely the principal, the surety, and the obligee. It is a risk management plan primarily designed to ensure commitment towards an agreement in business practices. If you are a contractor, you may not be able to bid for or get some contracts without a surety bond. Also, as a business owner, a surety bond will be required in some legal claims and to obtain certain licenses.

Understanding the Three Parties In a Surety Bond Agreement

  1. The Principal

The principal is the entity (business or individual) in need of a surety bond as a form of guarantee for future work performance. A surety bond is used for different purposes, such as getting a business license, completing a court case, guaranteeing business protection, or completing a contract. If there are damages or a breach of contract on the part of the principal, the claims will be settled by the company that issued the bond.

  1. The Obligee

The obligee of a surety bond is usually a legal entity, such as government agencies. It is the entity that requires a surety bond from a business outfit before offering them a contract. This is in line with the Miller Act passed in 1935, which helps protect the public interest from local contractors. The surety bond will help reduce the likelihood of financial loss and ensure commitments to contractual agreement from the principal.

  1. The Surety

The surety is a risk management company (usually an insurance carrier or a bank) that is responsible for the bond payment if there is a damage caused by the principal. If the obligee files acclaim for damages, the surety will initially cover the cost. With that, the interests of both the principal and the obligee will be timely protected. Although, the full cost of the damages will still be fully paid back by the principal, but at a later date.

How Does a Surety Bond Works?

There are thousands of bonds in the US regulated by each state government. Amounts and requirements are dependent on what applies in a state. Surety bonds are broadly categorized into two types, namely contract and commercial surety bonds.

  1. Contract Surety Bonds

Contract surety bonds usually required by government agencies to serve two primary goals. It helps ensure that a contractor completes a project he undertakes. Also, it helps to ensure subcontractors are paid the agreed sum by the contractor. It has three major types, which are:

-       Bid Bonds: A bid bond is used when bidding for a contract. It is to show that your company is financially capable and has all the required resources to get the job done.

-       Performance Bonds: If you are choosing for the project, you will be required to present a performance bid to guarantee satisfactory completion of the project. In case of failure to complete the job as agreed, the surety company will be held responsible for the completion.

-       Payment Bonds: If all things went as planned and the project is completed, then you will need to pay your subcontractors. A payment bond is to ensure that all parties that worked on the projects are as agreed.

  1. Commercial Surety Bonds

There are thousands of bond types under this category, and each is named after its purpose. They are mostly required in license or business registration, or legal cases. Examples are License and Permits Bonds and Court Bonds

 

What is DOT Number?

A DOT or United States Department of Transportation Number is issued by the Federal Motor Carrier Safety Administration (FMCSA). It is a unique identifier assigned to companies operating commercial transportation services, either for cargo haulage or transporting of passengers. The primary role of FMCSA is to improve highway safety for all road users. The agency uses the DOT number for different purposes. They include compliance reviews, audits, collecting safety information, crash investigations, and compliance reviews for certain vehicles engaging in interstate commerce. Registering a USDOT number involves several requirements, and one of the basic requirements is insurance coverage.

Do I Need a DOT Number?

You will be required to file a USDOT number in most states in the United States if you own a commercial vehicle that:

-       Weighs more than 10,000 pounds

-       Plies the interstate routes

-       Transports up to 8 passengers for payment

-       Transports  more than 15 passengers for compensation, even if you don’t carry them for payment

-       Transports materials deemed hazardous by the Secretary of Transport

Operating Authorities Under FMSCA

A certain amount of insurance coverage is required to get an operating license and meet other obligations in the US commercial transport industry. As a commercial vehicle operator, the type of operation your company can run, types of cargo you are permitted to carry, and the insurance requirements will be dependent on which operating authority granted to you by FRSCA. The following are some of the operating authorities under FMSCA:

-       Household Goods Motor Carrier: This is for vehicles that transport household goods for general household use from factories or stores.

-       Motor Carrier of Property (Except Household Goods):  This authority is granted to for-hire motor carriers transporting regulated goods, except household goods.

-       Broker Household Goods: This applies to individuals, corporations, or partnerships that arrange transportation of household goods for compensation.

-       Broker of Property: This is for individuals or companies that arrange transportation of property for compensation, except household items.

-       United States-Based Enterprise Carrier of International Cargo

-       United States-Based Enterprise Carrier of International Cargo (Except Household Goods)

Having ascertained the type of operating authority your company requires, you will need to obtain and submit proof of the appropriate insurance coverage to the FMSCA in order to get a USDOT number.

Types of Insurance Coverage Required for FSCSA Registration

Most of the operating authorities explained above have various types of amount of insurance coverage requirements. Some of them are:

-       Public Liability Insurance: This is meant to cover liabilities from property damage, environmental restoration, and bodily injury. The required coverage amounts are  $750,000 to $5 million for freight, $3,000 for non-hazardous freight transported in vehicles weighing 10,000 pounds or less, and $5,000,000 for passengers.

-       Proof of cargo insurance: This is required for both household goods motor carriers and freight forwarders. The coverage amount is $5,000 per vehicle and $10,000 per occurrence.

-       A Surety Bond: This is for both brokers of freight and freight forwarders. A surety bond of $75,000 and a trust fund agreement of $75,000.

-       Service of Process Agents for all operating authorities

-       Endorsement for Motor Carrier Policies of Insurance

After completing your registration, your operations will be monitored under the New Entrant Safety Assurance Program for 18 months. If after the 18 months, you are deemed to be compliant with the regulations, you will then be issued a permanent operating authority.

Business Owners Insurance Policy

Business Owners Insurance Policy 

A business owner policy (BOP) is a unique insurance type designed to protect major physical assets of a business, and also cover the business against liability risks. Business owner’s policy is sold is offered by property and casualty insurance companies and offers multiple types of coverage. Depending on the degree of physical damage to a commercial property or lawsuit from injured third-party, some events are capable of bankrupting your business, if you lack reliable adequate insurance coverage.  As a small or medium-sized business owner, your needs for business owner’s insurance cannot be overemphasized.

Why Do I Need Business Owner Insurance Policy?

Business owner policy has two packages combined in one policy, as it covers both commercial property and general liability. Damage to property and equipment, a lawsuit from third-party, and lack of working capital are three major factors that mostly affect the general performance of a business. These three crucial factors are what business owner policy covers as follows:

Commercial Property Insurance

Commercial property insurance protects your business against any damage to its physical assets due to vandalism, theft, fire or any kind of accidental damage. Your commercial building, equipment and fixtures are some of the properties generally covered by this product.

Liability Insurance Protection

Liability insurance covers any legal responsibility your business is held for as a result of harm done to others. This could be financial loss, bodily injury or property damage to third-person as a result of the failure or errors from your business activities.

Business Interruption Insurance

 If regular business activities are interrupted as a result of mechanical breakdown, fire or vandalism, theft or a covered disaster, a company without a reliable financial protection may be forced to slow down or stop operations. With business interruption insurance, the effects will be mitigated, and your company will be well protected. The coverage usually includes the income lost for that moment of interruption and the extra cost of operating from a temporary location.

How to Get a Business Owners Insurance Policy

Before buying a business insurance policy, the following are some of the things you need to consider:

Eligibility Criteria

As with other insurance types, BOP eligibility is determined by specific criteria, depending on the company and the product. Generally, for a business to be qualified, the requirements include:

-          Having less than 100 employees

-          The building size must not exceed 100,000 square feet or six  stories if it is an office

-          The building size must not be larger than 35,000 square feet if it is for wholesale, mercantile, or processing

-          The annual revenue must be more than $1 million

-          The business must be in a low-risk industry.

Talk to a Business Insurance Broker

Just like every other important financial decision, you must do your due diligence and grasp the concept of how BOP works for your business line. An insurance borker, preferably, an expert in the business insurance policy will help you have a better understanding of it and guide you on how to buy and make the most of your business owners policy.

Free Businessowners Policy Insurance Quotes

To save money on your business insurance policy, call Safepro Insurance Services and speak to a commercial insurance broker.

Builders Risk Insurance Explained

Builders Risk Insurance Explained

Builders Risk Insurance, which sometimes referred to as Course of Construction or Inland Marine Coverage, is a special type of property insurance. It is designed to cover a building that is currently under construction. Its coverage can be just for the building, or with other materials meant to be used for the construction; either at the construction site or at off-site storage locations and in transit.

Builders risk insurance policy can be purchased for either residential or commercial building project. The definitions of “residential” or “commercial” however, varies among the policy providers. For instance, some insurance companies may define a residential building as a family home for 1 to 4 numbers of occupants.  A commercial project could be anything from the shopping complex, office buildings, and sports arena. The policy is usually provided for three kinds of construction projects, namely:

-          Ground-up new construction;

-          Remodelling; and

-          Installation

How Does Builders Risk Insurance Work?

Just like every other insurance type, the builders risk insurance risk policy is a risk management financial plan, which pays for damages up to the coverage limit. The policy term could be for 3months, 6months, or 12 months, depending on the size of the project. In the event that the project isn’t completed when the policy expires, you can negotiate with your policy provider for an extension.

What Does Builders Risk Insurance Cover?

Damages from events such as fire, wind, explosion, vandalism, hail vehicles, are often covered by the policy. In some cases, limited coverage may be made available for building collapse. Comprehensive coverage may also include damages from events like earthquake, war, weather to property, mechanical breakdown, flood, and theft.

Keep in mind, however, that liabilities from injuries and accidents, and professional liability are excluded from the coverage. You may get stand-alone liability insurance for this purpose. Also, if you have subcontractors working on the same project, they will need to get their own insurance separately. The policy coverage is restricted to the building it is purchased for, and will not cover property belonging to other people.

Who Needs Builders Risk Insurance?

Builders risk is a crucial insurance policy that is essential for those who are into building construction. Having it will significantly help in averting potential financial loss from common damages in building construction. It will also help protect your reputation as a builder. You will most likely need builders risk insurance if you are a:

Builder

Contractor

Homeowner or property owner

Development or investment company owner

House flipper

How Much Builders Risk Insurance Do I Need?

There’s no one-cap-fits-all to this. The budget for the building will determine how much policy you will need.   Generally, builders risk insurance price ranges from 1% to 4% of the total construction cost. The exact policy amount will depend on the number or the kinds of items you want the policy to cover. While you will want to be prudent with your budget, it is essential not to leave out crucial aspects, including soft costs of the project. This will guarantee adequate coverage when the need arises. When shopping for a builders risk insurance policy, do ensure that you patronize a reputable insurance company that will guarantee a prompt response to your claims.

In order to receive a quote on builder’s risk insurance, please click on the following link:

https://www.safeproinsurance.com/forms/docs/Course-of-Construction-Application-spi.pdf

 

 

PASSCOPYSCAPE

Commercial General Liability

Commercial General Liability Explained

A commercial general liability (GCL) is an insurance policy that protects you and your business from a financial loss. Your company may be liable for injuries or damages to a third party resulting from the services or products you offer to the general public. Liabilities do arise from accident, error (by omission or commission), or non-professional negligence that causes another person harm or financial loss. No matter how highly trained and professional you and your employees are, you can’t completely rule out certain unwanted and unforeseen circumstances.

How Does Commercial General Liability Work?

Commercial general liability is a risk management plan that specifically covers your business from claims from a third person. Depending on a company’s line of business, A CGL policy can be designed to cover different eventualities under the following basic categories:

-       Bodily Injury  Liability

If a customer or any other individual visits your business site and gets injured, you may have to cover the medical payment. Body injury coverage implies that certain negligence has caused the event. Sometimes you may not directly cause the injury, but so long it happens within your business premises, you may still be found legally negligent. For instance, the injured person may claim he slips because you fail to place warnings signs around the wet floor. CGL insurance policy covers hospital bills and nursing expenses for an injury. Also, it covers funeral expenses if someone is injured and killed in an accident on your business premises.

-       Property Damage Liability:

If your business is found liable for damages to a third party’s physical property either on or off-premises, the policy will help you mitigate the financial cost of the liability. Third party’s property damages could be directly from your business activity or from a product offer. For example, if a home appliance which your company produced malfunctioned and caused a fire incident to a buyer’s property. You may be liable under non-professional negligent acts.

-       Personal and Advertising Injury Liability:

This helps cover your company from any legal responsibility arising from business infractions such as libel, copyright infringement, false arrest, entry or eviction of privacy, and slander.

Who Needs CGL Insurance?

Every business owner needs a CGL policy to help secure their businesses from legal suit that can adversely affect their trajectory. Liability payment for just a single legal action against your business could cause an irrecoverable bankruptcy and reputation damage. You can prevent such by insuring your company with a CGL policy customized for your line of business. The policy can be bought as a stand-alone coverage, as part of Commercial Package Policy, or as part of a Business Owners Policy.   CGL policy is a must-have whether you are a contractor or a tradesperson.

Does CGL Cover Workers Compensation?

Insurance regulations for businesses often set a distinction between coverage for the general public and the employees. CGL is meant to cover third-person, and it doesn’t cover employment practices liability and workers compensation. A workers compensation policy, which also covers employers liability, can be bought as a separate policy.