Have you been required to purchase a surety bond for your business? You thought your business insurance was enough, but now you’ve learned that you have to acquire these bonds to receive your license. You’re confused because you don’t even know what a surety bond is, where to buy one, how much they cost, or when you’ll need it. Well we’re here to help you out by making buying a surety bond a little easier.
According to Wikipedia a surety bond is, “…a contract among at least three parties: the obligee - the party who is the recipient of an obligation; the principal - the primary party who will perform the contractual obligation; and the surety - who assures the obligee that the principal can perform the task.” This means that a surety is a type of insurance for the obligee in which a third party (the surety) takes financial responsibility for an entity (the principal) if the principal breaches a contract and doesn’t complete their contractual obligation. The surety will then pay for any damages that the principal may have caused as well as find a new contractor for the job.
Surety bonds ensure that a contractor will complete the work they are required to do. There are hundreds of surety bonds for different industries, many of which are industries that serve the public. The surety bond is made to protect the people who have a need for your service more so than it is to protect you.
Bid Bond: Ensures that a bidder will enter a contract and uphold their end of the contract if a bid is won.
Payment Bond: Ensures that subcontractors and suppliers are paid for their work while under contract.
Performance Bond: A bond that guarantees the fulfillment of a contract.
Ancillary Bond: Ensures that incidental requirements for a given contract will be performed
If you are required to purchase a surety bond, there are many places you can go. You will most likely have to communicate with an agent or broker to help you find the best surety bond rates. You can also go online and get a surety bond quote at any time.