Insurance Coverage for Our Family

Everything You Need To Know About Surety Bonds For Your Small Business

22 September 2022

Christian Byrd

A surety bond, or surety bond insurance policy, is a financial guarantee that your business will uphold its contractual obligations. If your business fails to do so, the surety company will cover the cost of any damages up to the full value of the bond. Surety bonds are often required by law for certain businesses, such as construction companies. They are also sometimes required by businesses' customers or partners as a condition of doing business together. Here's what you need to know about surety bonds for your small business.

How Do Surety Bonds Work?

Surety bonds work by protecting your client from financial loss in the event that your business fails to uphold its obligations. If that happens, the surety company which issued the bond will cover any resulting losses up to the full value of the bond. The surety company may then require reimbursement from the principal for any money paid out.

Are There Different Types Of Surety Bonds?

Surety bonds come in many different types, each designed to protect against a specific type of loss. Some common types of surety bonds include:

• Performance Bonds. A performance bond is a type of surety bond that protects an obligee from financial losses if a contractor fails to complete a project according to the terms of their contract. 
• Payment Bonds. A payment bond is a type of surety bond that protects contractors and subcontractors from non-payment by the general contractor. 
• Fidelity Bonds. A fidelity bond is a type of insurance businesses take out to protect themselves against losses caused by employee dishonesty. 

Are Surety Bonds A Good Idea?

Whether or not a surety bond is a good idea for your business depends on many factors, including whether or not they are required by law or contract and how much protection you feel you need from potential financial losses. If you are considering getting a surety bond, it is important to speak with an experienced professional who can help you decide if it is right for your business. 

How Do You Get A Surety Bond?

If you determine that your business needs a surety bond insurance policy, the next step is to obtain one from a licensed surety company. The process typically involves filling out an application and undergoing a credit check. As with any insurance policy, the cost varies greatly depending on what coverage you need.

Talk to an experienced insurance professional who can evaluate all aspects of your business to provide recommendations on a surety bond insurance policy tailored to your needs. 

For more information about surety bond insurance, contact a local company.

Share  

Search