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Thursday, April 24, 2014

Question

What is the cost for a surety bond and general liability insurance? Where do I go to get it? Is $500,000 a lot for a surety bond for janitorial services? General liability is $1 million. Is that reasonable, and if the building already has insurance and I use their equipment what is this for?


Answer

A surety bond is basically a purchased guarantee that if you do not perform the agreed upon services for this company, they will be paid the cost of the non-performance, perhaps by being reimbursed for hiring another to do the work you didnít do. Personally, I have never seen this required of a small cleaning contractor, since the money at stake is seldom a six-figure amount, even for an annual contract on a medium sized building. This sort of bond makes sense for construction and large, time-constrained projects, but not for what you are doing.
The general liability covers damages for which you may be held responsible. Many of us carry a million or more in coverage due to the tendency of people to sue everyone in sight for their personal irresponsibility. Slip and fall incidents are the big concern. They can be expensive, even to defend against. A computer monitor knocked off a desk by an enthusiastic vacuum operator is of minor concern. Pocket change these days.
I would certainly have liability, since the buildingís insurance may or may not cover your operations, and that isnít the only place where you work and are at risk. However, I consider the surety bond a waste of money due to the nature of our work. Are they going to file against the bond for finding a few ounces of dust build-up in an office that was unoccupied for two weeks? What is that worth to clean up? Two bucks?
Explain that the surety you have is simple. If you leave the work undone, you will lose the contract. Case closed. Missed cleaning is an annoyance, but hardly a disaster that must be insured against.
Talk with your insurance broker about the ins and outs of business coverage. Buy as little as you need and make sure it actually protects you against the catastrophic event rather than the inexpensive repair. Lastly, it's a good idea to get competitive quotes every few years as prices tend to escalate and you may end up paying more than the market rate.
Lynn E. Krafft, ICAN/ATEX Associate Editor
lekrafft@juno.com