November 2021 - Competitive Edge Insurance

What’s the Difference Between a Surety Bond and a Contract Bond?

in Bonding, Construction, High-Risk Insurance, News, Video

The world of insurance can be complex—and for contractors, work can be dangerous, too. As a contractor, the question of what insurance you need to stay protected is likely to come up.

So, for starters: What’s the difference between a surety bond and a contract bond? Which do you need to stay safe?

Today, Brenda Jo Robyn, founder of Competitive Edge Insurance, is here on camera to give us the spiel; including the differences, benefits and risks, and what you need. Let’s dive in.

What is a Surety Bond?

There are three parties involved in a surety bond, including:

The surety company
The principal or the insured
The obligee

A surety bond is a contract where one party (the surety company) guarantees the performance of certain obligations in a contract of the second party (the principal or the insured) to a third party (the obligee).

When Do You Need a Surety Bond?

Surety bonds are needed for most licenses in the state of California and other states as well. Some examples of who might need a surety bond include:

Contractors
Real estate companies and agents
Financial institutions
Janitorial personnel

Why Do You Need a Surety Bond?

Licensed bonds are required in many states to do business, and are put in place by the state to protect the consumer.

The insured, or principal, purchases this bond in an amount prescribed by the state to pay the obligee (the state at this point), in case there’s a claim against someone’s license.

What is a Contract Bond?

A contractor performance bond is a written contract that guarantees the performance obligations under a contract.

Contractor performance bonds are used frequently in the construction industry but are also sometimes used in manufacturing and supply chains as well.

When Do You Need a Contract Bond?

The short answer: It depends! Contractors can be required to have a contract bond for different parts of the process when they’re bidding for a job, according to Brenda Jo.

What Is a Bid Bond? When Do You Need One?

Oftentimes, a bid bond is required to submit a bid for a project. Typically, these bids are in the public arena for states or cities. For example, the Department of Forestry.

“A bid bond lets this entity know that the contractor can provide a payment and performance bond should the job be awarded to them,” says Brenda Jo.

“If the contractor is awarded the project and the contractor decides that they cannot fulfill the obligation, the bid bond helps to pay for the difference in price that it costs to get a new contractor in.”

This leads to the next kind of bond couplings, which is the payment bond and the performance bond. Let’s discuss.

Payment Bonds and Performance Bonds

What is a payment bond? What about a performance bond?

A payment bond is a bond that guarantees payment for subcontractors and payment for materials.

A performance bond, on the other hand, covers the ability of the contractor to perform and finish the job as per contract requirements. If the contractor doesn’t perform, the contract bond kicks in and helps to pay for the completion of that performance.

infographic showing the difference between a surety bond and a contract bond

A Final Word

An important note: For all bonds mentioned, if they’re used and there’s a claim on a bond, the contractor who purchased the bond has to pay that back, says Brenda Jo.

This considered, surety companies look for strong financials in a company, including:

Assets
Lines of credit
Letters of credit

Surety companies look for anything that creates a picture that says you’re worthy of having a bond put into place—because if the bond is utilized and pays out, they need to know that the purchaser of the bond can pay that money back.

Bring in The Experts

At Competitive Edge Insurance, we work with insurance carriers across the country to place all types of business coverage. We are always seeking out new insurance companies to write hard-to-place and high-risk business insurance.

Don’t let cancellation dissuade you from finding comprehensive coverage. We can help! Learn more by connecting with our team today.

Additionally, for those interested in learning more, choose between our articles on the key differences between general contractors and construction managers and the difference between payment and performance bonds.

Why is Phishing the #1 Thing Killing Small Businesses?

in Cyber Insurance, News, Video

What is phishing? And no, we’re not talking about the activity of catching fish for food or sport. Phishing, spelled with a ‘ph,’ is an ever-growing concern defined as the “technique for attempting to acquire sensitive data, such as bank account numbers, through a fraudulent solicitation in email or on a web site, in which the perpetrator masquerades as a legitimate business or reputable person.”

But why is phishing especially harmful to small businesses? Why are they being targeted? We have all the answers and more, thanks to Brenda Jo Robyn, founder of Competitive Edge Insurance.

So, welcome to ‘Why is Phishing the #1 Thing Killing Small Businesses?’ We hope you stick around to learn something new, including how you might protect yourself as a small business owner.

What is Phishing?

Today, phishing can come in a variety of forms. According to Brenda Jo, phishing is “any activity that compromises your organization’s security… It can come in the way of an email or a text or an application.” These applications that retrieve your data can be on your computer, phone, even your iPad. Scammers target you and ask questions to get your information in really creative ways.

An Example of Phishing

Let’s say you receive an email that you’ve been expecting from Bank of America. Why not just ignore it? Well, because…

“It looks like you really should open it. [After all,] it’s a secure document for the bank you’ve been working with lately,” says Brenda Jo. The culprits know you’ve been waiting for this specific type of document to arrive in your inbox because they’ve been screening your emails.

“So, now they have captured that you’re working with this bank and now this bank is sending you a secure document that you need to open… You open it out of their Google docs, and all of a sudden, bam, you got a worm or a virus on your computer,” says Brenda Jo.

“That’s going to either start going through all your files and looking for stuff. They’re gonna track your emails or they’re going to track your keystrokes.”

Phishing is huge right now. Brenda Jo continues. “I can’t stress enough how important it is to make sure that your computers and data is secure from others. There are a lot of what are called ‘bad elements’ or ‘bad actors’ out there that are trying to steal your data… Right now data is money. And the more data you have, the more money you can make.”

How Dangerous is Phishing for Small Businesses?

The statistics speak for themselves. Right now, 60% of small companies that have been hit by a cyber attack are closing their doors within six months. The reason? It is very costly to come back from a cyber attack.

Most small businesses don’t have the collateral, backing, or lines of credit to make themselves whole again after an attack of this caliber.

How Can Small Businesses Protect Themselves from Phishing?

Training

Focus on training.

Training your employees: (For example, they need to know how not to send excel spreadsheets emails! Instead, create a zip file or convert the document into a PDF. Why? It is very easy to scrape data from an excel file while in an email.)
Training IT: They need to know what to look for.

Due Diligence

Due diligence is the bare minimum. Document your training and go over it on a weekly or quarterly basis. Next, ensure your IT systems are multi-layered. This means not only having firewalls on your computers and servers but also helpful, educated IT personnel available.

Develop a Planned Crisis Response

A planned crisis response includes a cyber liability policy. As Brenda Jo says, “one of the things that kills the small business is the lack of PR or response to their clients and/or vendors when a phishing attack occurs and data has been compromised.”

“It’s very expensive to go and let everybody know, ‘Hey, your information was taken and here’s the year’s worth of credit monitoring’”—especially if the data is health-related.

You might face both federal fines as well as fines from the state government. The costs add up, and that’s where cyber liability comes in to help.

Reach Out to Competitive Edge Today

As you look at your coverage, think of the potential for cybersecurity issues, evaluate your tolerance for risk, and take the time to look at your policies in detail. As experts, we at Competitive Edge can tell you where you are vulnerable and what the risk might cost you. It is then your decision to accept the risk or mitigate it with coverage. You know what we would do.
Interested in learning more about the dangers of ransomware and why the need for cyber liability coverage is increasing? Read on in cyber liability coverage for the new era of ransomware.

Understanding the Basics of Workers’ Compensation

in General Business Insurance, High-Risk Insurance, News, Workers' Compensation

Workers’ compensation is an important part of business for any employer. Having workers’ compensation insurance helps protect both employers and employees, and is required by most states.

Workers’ compensation insurance can help recover an employee’s lost wages while they recover from a work-related injury or illness or even support family members if an employee is killed in a work-related accident. This type of insurance can be complex, so we’re here to help you in this article: “Understanding the Basics of Workers’ Compensation.”

What is Workers’ Compensation?

“Workers’ compensation is a form of insurance, paid by employers, providing wage replacement and medical benefits to employees who are injured during the course of working for the insured.”

These wages and benefits are provided in exchange for eliminating the employee’s right to file a lawsuit against their employer’s negligence.

Workers’ compensation benefits are designed to help employees if they are unable to work, cover medical expenses, as well as other expenses and rehabilitation costs associated with disability or illness. As you look to explore workers’ compensation options, it’s important to look for one that provides adequate coverage and compensation for your employees.

What Does Workers’ Compensation Cover?

Specific workers’ compensation coverage laws vary depending on your state. The most common compensation requires workplace injury insurance to include:

Payment for lost wages
Vocational rehabilitation
Permanent disability
Temporary disability
Medical costs and treatment

Who is Required to Purchase Workers’ Compensation Insurance?

Does every business need to purchase workers’ compensation insurance? The need for insurance falls on a state-by-state basis.

In California, for example, “all employers must provide workers’ compensation benefits to their employees under California Labor Code Section 3700. If a business employs one or more employees, then it must satisfy the requirement of the law,” according to the California Department of Industrial Relations.

“State rules are typically based on the type of business entity you have (sole-proprietorship, partnership, LLC, corporation) and your total number of part-time and full-time employees. In most states, one or more employee will trigger coverage requirements,” according to Workers Compensation Shop.

Does My Small Business Need Workers’ Compensation?

Short answer? Most likely. Insureon tells us that for almost all businesses in the United States, workers’ compensation insurance isn’t optional.

“Small businesses typically need a policy in place as soon as they hire their first employee. Even when not required by law, this policy provides important protection against medical expenses and employee lawsuits related to workplace injuries.”

Don’t worry—Competitive Edge can help your small business find insurance.

If I Am a Contractor, Do I Need Workers’ Compensation?

When you’re a contractor, your work can take you anywhere! This is exciting, but also opens up a window of opportunity for injury or illness—which is a much heavier financial burden to carry when you’re flying solo.

Think about what an injury on the job might mean for your future or work. By investing in workers’ compensation, you can protect yourself from the exciting, but risky unknown that lies ahead.

For more on workers’ compensation for independent contractors, please read on here.

Why Is Everyone Talking About Workers’ Compensation Now?

With the arrival of COVID-19, many people wondered if the contraction of COVID-19, and thereafter the time necessary to quarantine at home, was compensable under state workers compensation acts.

The answer to that question still remains unclear but is a topic of discussion.

According to the National Council on Compensation Insurance (NCCI), “workers compensation laws provide compensation for ‘occupational diseases’ that arise out of and in the course of employment, many state statutes exclude ‘ordinary diseases of life’ (e.g., the common cold or flu).

“There are occupational groups that arguably would have a higher probability for exposure such as healthcare workers. However, even in those cases, there may be uncertainty as to whether the disease is compensable.”

Where Can I Get Workers’ Compensation Insurance?

From the State Compensation Insurance Fund (State Fund) or a licensed insurance company. In some cases, employers might be able to self-insure.

How Much Does Workers’ Compensation Insurance Cost?

The fast and hard answer: It depends! Rates can vary from carrier to carrier and from state to state. By comparing rates and working with a trusted insurance professional, like our team at Competitive Edge, you can find a carrier that best fits your needs.

Although cost is a big factor to consider, it’s also important to look at:

Services provided
What industry the carrier is in
Access to doctors
Access to the claims adjusters

What Happens if I Get Caught without Workers’ Compensation?

For employers who think the money saved by not investing in workers’ compensation is worth it, perhaps it would be beneficial to detail the extreme consequences of not having workers’ compensation.

Failing to have workers’ compensation is a criminal offense.

In fact, section 3700.5 of the California Labor Code makes it “punishable by either a fine of not less than $10,000 or imprisonment in the county jail for up to one year, or both.”

“Uninsured employers can be levied a fine of $10,000 per employee on the payroll at the time of injury if the worker’s case was found to be compensable, or $2,000 per employee on the payroll at the time of injury if the worker’s case was non-compensable, up to a maximum of $100,000.”

The bottom line: You can face up to $100,000 total if you are an employer who is caught without workers’ compensation insurance!

Employers who claim to have been “unaware” of the need for holding workers’ compensation insurance still face the consequences. Although obtaining workers’ compensation can be expensive, especially for those employers who frequently have claims made against them, there is no “savings” worth not having workers’ compensation insurance.

At Competitive Edge Insurance, we believe the first step is for your business to show us under the hood so we can help build your case to the carrier to get the right coverage at the best price based on your real-world conditions.

For more on how to prepare for employee claims and what you need to know about workers’ compensation for independent contractors, please read on here.

What to Expect from Changing Contractor Costs

in Construction, High-Risk Insurance, News, Video

The global pandemic brought many changes to the construction and builders industry. Here’s what to expect in 2021.

Shock Loss: How to Redefine your Risk Profile in a Post-COVID Market

in Construction, High-Risk Insurance, News