Pennsylvania Construction Insurance serves as a form of risk management for your construction firm. This is a two-party agreement between you, the insured, and your insurance company. This agreement assumes a promise that the insured will be compensated by their insurance company in the case of a covered loss. In contrast, a surety bond is a contract among 3 parties, at the least. The surety issues the bond on behalf of the principal, and the contract guarantees that the principal will complete an obligation to a third party. If that obligation is not met, the third party can recover losses from that bond.
What’s important to understand is that surety bonds are in no way a replacement to Pennsylvania Construction Insurance. Insurance coverage will protect you against expected losses. These may include pollution liability claims, builders risk, and commercial property claims. On the contrary with surety bonds, losses are not expected, therefore surety bonds are only issued to qualified individuals or businesses whose projects require a guarantee.
One final, but very important, difference between Pennsylvania Construction Insurance and surety bonds, is that when an insurance claim is paid, the insurance company does not expect to be “repaid” by the insured. However, a surety bond is a form of credit, so the principal is responsible to pay for any claims. Simply stated, Pennsylvania Construction Insurance protects you and your business, while surety bonds protect the consumer from a breach of contract from your company.
Tri-State Insurance Agency provides a comprehensive Pennsylvania Business Insurance portfolio for companies throughout Pennsylvania, northern New Jersey and New York. To learn more about these coverages and our Pennsylvania Construction Insurance Policies, please contact us at 1(888) 990-0526.