Financial guarantee insurance is essentially a promise, from one company to another, that says that they will pay any outstanding expenses if the original contract holder is unable to pay for them. It is a legal commitment that a company makes on behalf of someone else to cover any financial obligations that are owed. This coverage is important for several reasons, but here are a few of the most important things to keep in mind when deciding whether or not to get this coverage.
Guarantee insurance helps mitigate risk for all those involved in a project.
Insurance can help projects become more attractive to potential investors.
A policy doesn’t necessarily cover the full amount of the liability.
A financial guarantee insurance policy cannot be canceled or renegotiated after it’s been executed.
Sometimes guarantee coverage is a requirement, but sometimes it’s simply a good idea to have it.
You should also know that financial guarantee insurance costs will vary primarily due to two factors: the bond amount being requested and your personal and business finances. The company who issues insurance will take a look at your personal credit score, your business paperwork, and all of your assets. Agencies will assess what the risk is in covering you, and your rate will vary depending on the outcome of their assessment.