Build a more substantial customer base and protect them and your employees with bonding insurance for a cleaning business.
Starting a new business is fun, exciting, and it can be complicated. You get to choose a business name, open a business bank account, and open your mail to find that treasured business license. But one of the checklist items you can’t forget as you get your business off the ground, is bonding insurance for a cleaning business.
Not every state requires bonding insurance, so it may be tempting to skip the cost. However, it’s a cost that’s worth incurring since the bond will protect your business, your employees, and your customers in the event of an adverse incident.
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What is bonding insurance for a cleaning business?
A bond is very similar to an insurance policy. It prevents a client from being held liable should something go wrong on the job. If an employee misbehaves or does something illegal on the job, like stealing client property, the bond ensures that the client will be reimbursed for the loss up to the bond limits. (Bond coverage usually runs anywhere from $10K-$100K.)
While bonding insurance for a cleaning business is similar to insurance, they aren’t quite the same. Liability insurance protects the company from any losses it may sustain and usually covers small claims to avoid lawsuits and litigation. A bond is designed more to protect the customer in the event they suffer any damages while your team is on the job. Hopefully, you’ll never have to use the bond, but it’s a good idea to have it in place, just like insurance, should something happen.
Why is it so important?
Bonding insurance is essential for several reasons. First and foremost, some states won’t issue a business license without a surety bond. In those cases, the bonds are mandatory if you want to start a business.
Even if the bond isn’t required, it’s highly advisable to have one because accidents and incidents do happen. Should one of your employees accidentally break something on a job site, or worse, steal something, the bond helps ensure sure that the client is reimbursed and that the matter doesn’t necessarily have to go to court.
Another reason bonds are essential is that they help establish your credibility when acquiring new customers. If the difference between you and the competitors is that they have bonds and you don’t, a customer will likely go with another service. Clients like to know that they’re protected and that whoever they hire as their cleaning company has the resources it needs to handle an unfortunate situation resulting in a loss.
How to get bonded
There are dozens of companies out there that can provide bonding insurance for a cleaning business. We suggest getting a few different quotes to compare prices and service from the insurance companies. Most quotes are free and only require filling out a quick application.
In most cases, an insurance company will check your credit score, which may affect the bond price. Generally, poor credit won’t deny you a bond, it’ll just make it more expensive. As you rebuild your credit, you can renegotiate the bond when your score goes up.
Bonds do expire, but they can easily be renewed before the expiration date. Thankfully, the renewal fee isn’t as much as the initial premium, but it is something to keep in mind for your budget whenever the bond runs out. If your bond is close to expiring, look into renewal before it lapses. If the bond does lapse, you may have to apply for a new one, it may cost you more money, and for a temporary period, you won’t be able to tell clients that you’re bonded, which can hurt your business.
Bear in mind, too, that there’s a difference between surety bonds and fidelity bonds. A surety bond protects the client from losses sustained due to improper conduct by your employees. Your state or city may require a surety bond to start a business, though, as mentioned, they aren’t always necessary. (They are always recommended, though.)
A fidelity bond protects your cleaning business from fraudulent incidents caused by your employees against your business. So a fidelity bond wouldn’t pay anything out to a client if something happened on the job site due to negligence or malicious intent. Fidelity bonds are generally not required and won’t make much of a difference in attracting and retaining clients. However, taking out a fidelity bond isn’t a bad idea if you have the cash for it.
How much does it cost?
Bonding insurance for a cleaning business can cost anywhere from $125-$650 for a year. The bond premium depends on a few things. First, your credit history will play a large part in determining the bond price, so the better your credit score, the cheaper the premium will be.
The number of employees who work for your business will also influence the cost of the premium. If, for example, you only have five employees, you won’t need a ton of coverage from the bond, so you may opt for a bond with a lower limit, thereby lowering the premium as well.
One last word of caution regarding prices: bonding insurance for a cleaning business often requires that the policy-holder (your company) pay the bonding company back for the losses paid out to a client, unlike liability insurance, which settles and then likely raises your premium. The benefit of the bond is that a) you are guaranteeing clients that they are protected, and b) you can often pay back the amount owed in installments instead of a lump sum, which can make a big difference for a small business.
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