The Immense Importance Of Avoiding Surety Bond Claims

Avoiding Bond Claims

As a company, which services the residents of Canada, you have a daunting task ahead. You have plenty of different responsibilities to juggle and these can become overwhelming from time to time. Another thing that needs to be noted is the need for surety bonds. The bond helps to provide the client with protection, while placing additional stress on your shoulders. In order to keep your business afloat, protect your integrity and solidify your future, it is pertinent to avoid bond claims at ever step and turn. Below, you’ll learn about the importance of avoiding claims.

Massive Losses

Most business owners will immediately focus on the repercussions of losing a claim. This is no coincidence. Losing a claim will undoubtedly sting and will take a large sum of money directly from your company’s budget. When the bond claim is made, the surety company will analyze the situation and make a ruling. If they rule against you, they’ll reimburse the obligee. The amount of the reimbursement will depend, but could be as much as the original bond amount.

Once the surety has repaid the client, they’ll then turn their attention to your company. This is the case, because you signed the indemnity agreement, in order to get the bond. Typically, this contract guarantees that you’ll pay the surety back for any claims that they’re forced to pay out. Since the amount lost due to a claim could be astronomic, it will put smaller businesses into jeopardy.

Could Hinder Your Future

Another thing to take into consideration is your company’s future. For many businesses, it will be absolutely pertinent to be able to maintain the validity of the surety bond. If you lose your bond, you’ll need to proceed through the entire process again and this could prevent you from earning money in the short term. Also, if the bond claims continue to pile up, there will likely come a time, when you’ll be unable to pay the reimbursement amount. If this happens, the surety will undoubtedly cancel your bond and refuse to provide you with a refund.

Of course, the most devastating fact of all is that this type of behaviour could stick with you. Other surety companies will know about your failures and they’ll be very cautious about issuing you bonds. If you’re not careful, your ability to get bonded could be eliminated entirely.

Reputation Is Pertinent

As you likely already know, reputation is incredibly important for businesses. If your business obtains a bad reputation, you’ll find it much more difficult to attract customers and business partners. Unfortunately, bond claims can have a major impact on your reputation. If you consistently rack up claims and fail to offer reimbursement, you’ll quickly give off the impression that you’re unreliable and unprofessional.

Remember that word of mouth is vital. If that word is negative, your business is going to be hurt severely. To prevent this from happening, you should do your best to avoid claims.

Tips For Prevention

Now that you’ve learned about the enormous importance of avoiding claims, you should learn how to prevent them. The truth of the matter is that the majority of Canadian bond claims stem from a lack of communication between the service provider and the client. You won’t have much difficulty fixing this problem. Remember to remain in close contact with the client at all times. You should also provide them with work on hand reports throughout. This will give them encouragement that the work is progressing and will be finished on time.

Overall

At the end of the day, claims could wreck your business. Not only will it result in immense monetary loss, but claims will also hurt your reputation. So, if you truly wish to succeed, you need to protect your business by avoiding claims!