When Would a Surety Bond Be Needed?

A surety bond is needed before you can obtain a license or seal a contract. Businesses like auto dealers, mortgage brokers, and contractors often require these bonds.

Getting a surety bond can be quick and painless when you work with a good surety agency. These agencies make it easy to apply, and they’re able to issue quotes quickly and affordably, even for applicants with bad credit.

License and Permit Bonds

A License and Permit Bond ensures that a company will abide by all relevant rules and laws. This helps protect consumers and government agencies from financial losses caused by a bonded business’s actions.

A license bond is typically required by a local municipality or state agency as a condition for obtaining a permit to begin work on a project. These bonds can also ensure that contractors comply with building codes and other governmental regulations during construction.

These types of surety bonds are written by a surety company. When you apply, they will collect information about your personal and business credit history and details about the industry in which you’re operating. This information will then be reviewed by their underwriters. Then, they will provide you with a quote and the bond cost based on your financial history.

Contract Performance Bonds

When a contractor is awarded a project, they often need to get a performance bond to protect the property owner. This kind of surety bond guarantees that the contractor will carry out the project by the plans and specifications of the contract.

While these bonds are usually required for government-related construction projects, they are also popular in the private sector. These bonds help lower the financial risk of a property owner while giving contractors a competitive advantage and the confidence of knowing that they will get their jobs done.

The owner may file a claim with their surety company for losses up to the bond’s amount if a contractor breaches the terms of the agreement. In this case, the surety company will investigate the failures and compensate the property owner if necessary. Alternatively, the surety may provide replacement contractors to finish the job until the original contractor can repay them.

Court Bonds

Court bonds, also known as judicial surety bonds, ensure that you will be protected from any loss in a court proceeding. These are often required in various cases, from probate to appeals.

Usually, the obligee will tell you which type of bond they require. This is important, as it will determine your underwriting and collateral needs.

The bonding process for a court bond is similar to any other surety bond, but the amount you pay will vary based on the type of court bond you need. You can get a ballpark price using our free bond cost estimate tool or contact us directly to get a firm quote for your specific court bond.

Like any other type of surety bond, a court bond is written very carefully. The principal’s financial strength and stability, as well as reputation, are evaluated by the underwriter. Collateral is generally required in the form of an irrevocable letter of credit.

General Liability Bonds

Contractors often need a general liability bond to protect themselves financially from financial loss caused by claims arising from their work. Typically, these policies cover bodily injury or property damage due to the contractor’s work during the policy period.

Another common type of bond is first-party fidelity bonds, which reimburse a business if an employee commits theft or fraud against their company. IT companies also commonly use these to protect against employee theft and fraud, especially digital data.

There are also public safety bonds, which protect the public from financial loss due to road accidents. Some states require these bonds for contractors working on projects involving heavy or oversized loads that may cause damage to the roadways.