If you run a business, you will most likely be required to purchase surety bonds in order to operate. Different types of surety bonds are required in different states; there are over 100 kinds of surety bonds. Most surety bonds fall under certain categories depending on the industry they’re purchased for. Below we explain the surety bonds you are most likely to encounter.
These bonds may be required by a government entity or the owner of a construction project for a contractor. They ensure that the contractor will complete the job required of them. Common contract surety bonds include:
-Bid bonds- a bond that reassures the obligee that the principal will enter a contract and fulfill the contract if they win a bid,
-Performance Bonds- Protects the obligee if the principal defaults on a contract.
-Payment Bonds –Guarantees that the principal will pay the subcontractors for a project
These bonds do not fit in the ‘contract’ classification for bonds. They expand over a wide range of industry types. There are 4 types of commercial bonds.
-License and Permit Bonds- These bonds are required by certain government entities as a prerequisite to obtain a license or permit.
- Court Bonds- These bonds relate to the courts and are divided into judiciary bonds and fiduciary bonds
- Public Official Bonds- Required for certain elected public officials to guaranty honesty and ethical behavior. It protects the public from any malfeasance committed by the public official
-Miscellaneous Bonds- Bonds that don’t fit any of the previously stated categories.
Business services bonds protect the obligee from theft. It guarantees that any stolen property by the principal will be replaces or reimbursed by the surety. These bonds are common for housekeeping services, janitorial services, or any other service that requires employees to enter homes and places of business.
Most surety bonds that you will encounter fall into one of these categories. Remember that a surety bond isn’t for your protection; it’s to protect the public in case a contract is breached. If you are required to purchase a surety bond, go online and get a surety bond quote now.