What does a Surety Bond protect against?
A surety bond is an agreement between two parties.
The first party is the surety, who promises to perform on behalf of another party when called upon. The second part is the principal, whose agent the Surety Bonding Company becomes when they are in need of one. A Surety Bond protects against loss or damage that may result from a breach in contract by the principle that leads to payment being made by the surety for any damages incurred.
Surety Bonds can be taken out in all levels of industry and finances including but not limited to retail, services, healthcare, construction, energy, and others. Specific types of bonds can also be taken out based on geographical location or even time period.
There is so much that a Surety Bond can protect against that companies are often shocked when they find out just how much is covered under the bond.
How common surety bonds protect you and your customers?
One common bond that is put into place for small businesses and homeowners is a Contractor’s Performance Bond. This type of bond protects customers from not only loss of materials but also loss of work during the building process, which is very helpful with home projects where the client may be out of their house for weeks or months at a time. The business owner can rest easy knowing that if anything happens to their property, like theft or vandalism, they will be compensated under the terms of the bond.
An even more common surety bond that affects everyone on a daily basis is an auto insurance policy; this particular protection covers living expenses including housing and utilities should someone become incapacitated in an accident.
The most important use for bonds: If one of your customers or employees becomes injured as a result of a lack of safety equipment or intentional acts by management, under the umbrella of a bond you can cover any medical expenses required to treat them for their injury. Such bonds are often seen in manufacturing and construction types of businesses where an accident is not only likely but also costly.
What happens if a business that you have bonded goes out of business?
A bond protects both parties from loss so even though they may no longer be able to work with the public, the contract will still be enforced by the surety company through repayment or reimbursement to all those who suffered losses during this time.
In worst-case scenarios, such as money laundering, embezzled and other fraudulent acts; once proven guilty the bondholder is authorized to seize assets in order to pay clients. This process can be lengthy but it is well worth avoiding larger lawsuits.
What are some common types of Surety Bonds?
The most common types of bonds include Contract Bonds, Court Bonds, License and Permit Bonds, Fidelity Bonds, and Employee Dishonesty Coverage. Each of these surety bonds protects different parties under specific circumstances while also being just as important to have in place on any form of application or new business start-up. For example, a contractor’s performance bond protects both the client by ensuring that they will receive their project completed on time with no damages to their property while also protecting the contractor from loss due to customer complaints or faulty workmanship by the client.
What is the best way to choose a surety bond for your company?
Since so many types of bonds exist it is important to be aware of what is offered in order to make an educated decision on which one will protect you and your business the most effective. By making sure that there are no specific obligations or requirements out of line with your business type is also vital, as well as ensuring that all parties are protected under the act.
By working with an experienced surety broker you can rest assured knowing that they have experience dealing with these very issues and will help you find not only what works best but also at an affordable price for your needs.
Consulting a professional who has access to multiple companies specializing in several different types of surety bonds in order to get a quote can really help you in the long run by saving time and energy.
That way they will also be able to advise you on what would be best for your company’s specific needs, while also making it simple for you to compare prices. This type of professional will take into consideration all aspects that come with surety bonds such as the amount of money required, the application process, time frame & length commitment.
Customer Service is very important when finding a suitable guarantee bond for your business; having someone who listens and responds quickly ensures that there’s no confusion between your expectations and theirs so that everyone is on the same page leading up to and throughout the entire process.