Open for Business: Surety Bond vs. Liability Insurance?

Starting out in a new business is exhilarating, but it comes with the dual responsibilities of complying with the law and protecting yourself professionally. While juggling compliance and protection, one of the most common points of confusion for new professionals is the difference between a surety bond, such as a license and permit bond, and liability insurance. They may sound similar, but their purpose is fundamentally different: a surety bond is often required for the protection of your clients or the public, whereas insurance protects you and your business. As you advance your professional goals, build a secure foundation by understanding the essential coverages that will support your path to success. 

Licensed To Do Business? 

Whether you’re in the business of real estate, mortgages, tax preparation, financial services, HVAC, car sales or something else altogether, it’s essential to be in compliance with the laws and standards of your industry. For many professionals, compliance involves obtaining a type of surety bond, known as a license and permit bond. Simply put, a license bond is typically required by a government agency (the obligee) to ensure you, the professional (the principal), will follow industry regulations and laws. As Investopedia further explains, a surety bond essentially acts as a financial guarantee that your services are provided in accordance with the applicable laws and standards of your industry. If a client suffers financial loss due to your non-compliance or negligence, they can file a claim against your bond with your surety company and seek restitution. In short, a license bond protects your clients and the public—not your business.

As a national, direct, and digital writer of license and permit bonds, and all kinds of surety bonds, Colonial Surety Company makes it easy and speedy for professionals in every field to obtain their required bonds online. Quote, purchase, and download your bond in minutes, right here: License and Permit Bonds.

Protection for Yourself and Your Business: Liability Insurance

When you are in business, things can go wrong. That’s just how it goes. You might make a mistake (even the most diligent professionals do). A customer might accuse you of not meeting expectations or deadlines. Maybe someone will fall on the way out of your office. These are the types of risks inherent in business. That’s why it’s crucial to protect yourself and your business from the financial fallout of unexpected claims—and that’s what liability insurance exists to do. Liability insurance directly protects professionals from claims of errors, omissions, or negligence. As the Insurance Training Center underscores: 

In today’s business environment, even the most skilled professionals can face lawsuits. One missed detail, a misunderstood recommendation, or a simple oversight can lead to costly legal claims—even if you did nothing wrong. This is where professional liability insurance becomes essential. It helps cover legal defense costs, settlements, and judgments tied to the services you provide. Without it, your personal or business assets could be at serious risk.

Just as large companies and their executives are wrapped in layers of coverage that help them do business with confidence, Colonial Surety Company makes liability insurance available and affordable for professionals and businesses of all sizes, and offers a wide range of coverage options, including:

• Professional Liability (E&O) Insurance to shield you from allegations that your professional services or advice caused a client financial harm. For consultants, accountants, real estate agents, notaries, and countless others, professional liability insurance is a non-negotiable layer of protection. 
• General Liability Insurance covers everyday risks like third-party bodily injury or property damage that occurs on your business premises or as a result of your operations. Think of a client tripping on your property or an employee accidentally damaging a client’s equipment.
• A Business Owner’s Policy (BOP) conveniently combines liability and property insurance to protect against many of the risks commonly associated with running a business, such as property and equipment damage, customer injuries, and defense in the event of a related lawsuit. If a fire, theft or other covered disaster strikes, BOP provides coverage for computers, furniture and other property damages too.
• Cyber Liability Insurance: Cybersecurity threats impact all businesses, making it critical to mitigate the damage and ensure obligatory investigation and notification procedures are implemented. That’s why Colonial Surety Company includes $50k of cyberliability insurance at no extra cost with most first-time purchases of liability insurance policies. Higher limits are available depending on your business needs. Colonial Surety’s cyber liability insurance arms you with response protocols and notification services that comply with regulations, as well as protection against lawsuits and regulatory actions.

In summary, remember that there is a distinct difference between surety bonds and liability insurance, and most professionals require both. For the protection of clients and the public, local, state, and federal agencies can require professionals in many fields to obtain surety bonds, essentially guaranteeing that services meet applicable standards. On the other hand, liability insurance helps professionals protect themselves and their businesses from the financial fallout of unexpected claims resulting from the everyday risks of being open for business. 

Expanding Your Business? People–and Protection
As a professional at the helm of a thriving business, one of the most beneficial steps you can take for yourself and your employees is establishing an employer-sponsored retirement plan, like a 401 (k). Doing so can even have tax advantages. The Department of Labor offers information to help you get started, including: Choosing A Retirement Solution for Your Small Business. When you start a retirement plan, you’ll be required to obtain an ERISA Fidelity Bond for the protection of the plan, and you’ll need Fiduciary Liability Insurance for yourself. Learn more about these essential coverages for retirement plan sponsors right here: ERISA Bonds and Fiduciary Liability Insurance Explained. 

Growing your business likely means staffing up, too. As you expand, it’s wise to add Employee Practices Liability Insurance (EPLI) to your coverage. Alternatively known as Harassment Insurance, EPLI provides protection against claims related to hiring, firing, and workplace conduct. Learn more about EPLI and what it covers right here: Employee Practices Liability Insurance (EPLI). Depending on your business and operations, you may also find that Commercial Crime, Directors & Officers (D&O), and Workers’ Compensation coverages are vital. 

You can stay up to date with all of the efficient and affordable policies available at Colonial Surety Company right here: Business Insurance of All Kinds.

Why Colonial Surety?

Colonial Surety Company has been trusted since 1930. We are licensed nationwide and make it simple to quote, purchase, and manage bonds and insurance instantly, online. Whether you’re just starting your business or expanding into new markets, we provide exactly the coverage you need to stay compliant and protected.

Get Protection Now

Don’t leave your business exposed. Instantly quote and purchase the bonds and insurance you need to protect your company, employees, and clients.

Colonial Surety Company: Surety Bonds, Fidelity Bonds, and Insurance