Different Types of Surety Bonds

Businesses must cultivate robust risk management and loss control measures. Regardless of your experience, skills and diligence, accidents and unforeseen difficulties are inevitable. Surety bonds can play a crucial role in your company’s ongoing financial security, as they may cultivate a means of compensating other parties in the wake of such mishaps.

What Are Surety Bonds?

Surety bonds are among the most common types of bonds that your business might need. Insurance companies often sell these financial instruments and may help protect the financial interests of those with whom you enter into contracts or business arrangements. They generally entail an arrangement in which your business purchases bonds that can be used to compensate clients or other parties who might otherwise suffer financial losses for which you’re to blame. This limits the need for further proceedings, such as lawsuits.

What Types Are There?

Your business’s bond-related needs may be determined by various factors, including its industry, location and clients’ preferences. Familiarize yourself with the following common types:

• Contract bonds, also known as construction bonds, can offer financial security for you and your clients in situations where you agree to complete a project up to certain specifications. If you provide substandard services, miss deadlines or otherwise do not meet your obligations, these bonds can compensate other parties.
• Government entities often require license and permit bonds and can provide reassurance that your business will abide by relevant laws and applicable regulations. These bonds may be mandated for those in specific industries. For example, automobile dealerships may need auto dealer bonds.
• Fidelity bonds, also known as honesty bonds, are frequently needed if your business and its employees have access to clients’ property. For instance, if you operate a cleaning service and your employee commits criminal, fraudulent or dishonest acts affecting a client, these bonds can offer compensation.

We’re Here to Help

Contact Affordable Insurance Group of Panama City in Panama City, FL, to learn more about surety bonds.

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.