Bonds

As a business, you aim to provide reliable goods and services to your clients and customers in a timely manner. However, there may eventually be times when an accident, error or other circumstances cause delays or deficiencies that may affect your ability to do so. Certain incidents or setbacks may occur regardless of experience or diligence, so your company should implement and maintain suitable loss control measures, including surety bonds. 

Different Types of Surety Bonds 
Surety bonds can provide financial assurance to your clients that your business will fulfill various obligations and adhere to certain requirements. By purchasing surety bonds, you can ensure that your clients have a means of compensation for your shortcomings. As such, your firm may be better equipped to protect its reputation and retain future business opportunities. 

Surety bonds generally function as agreements between the following parties: 

• The principal is responsible for purchasing surety bonds.
• The obligee determines if surety bonds are required.
• The surety underwrites and maintains surety bonds. 

If the principal fails to deliver agreed-on products and services to the obligee, bonds can allow the latter to receive compensation. The surety may then pursue payment for that amount from the principal.  

Surety bonds come in many forms but generally fall under four main types: 

• Commercial surety bonds
• Contract surety bonds
• Fidelity surety bonds
• Court surety bonds 

What Are Commercial Surety Bonds and When Are They Required? 
Commercial surety bonds can help your business guarantee its clients that it will comply with various regulations, requirements and laws. These bonds may be required in various situations and come in many types, including the following: 

• License and permit bonds—Government agencies issuing your business licenses or permits may require a bond to ensure your operations comply with regulations and laws related to their industry.
• Public official bonds—Public officials may be required to secure a bond to guarantee they will fulfill their duties with honesty and integrity.
• Fiduciary bonds—Individuals or businesses that act as fiduciaries, such as trustees, guardians, or administrators of estates, may be required to obtain a bond to provide protection against malfeasance or mismanagement.
• Court bonds or judicial bonds—In legal proceedings, a court may require a bond to be posted as a condition of granting a particular action. For example, an appellant may be required to post a bond to guarantee they will pay the original judgment amount as well as any damages or fees awarded to the appellee if the appeal is unsuccessful.
• Customs bonds—Businesses that import goods may need to obtain a customs bond to comply with customs regulations and pay any duties or fees owed. 

What Are Contract Surety Bonds and When Are They Required? 
Contract bonds may be required for some of your projects. These bonds, also known as performance bonds, provide financial assurance to your clients that your organization will fulfill its contractual obligations and deliver promised goods or services. These bonds may be prevalent in the construction industry, as contractors and construction firms may need to reassure their clients that they will have a way to be compensated if a project is not completed as planned.  

Performance bonds are generally issued and underwritten by banks or insurance companies and can compensate your clients if your business cannot live up to its side of an agreement. 

Get the Right Bonds 
With nearly 40 years of experience helping individuals, families and businesses assess and address their coverage needs, the dedicated staff at Owens Insurance Agency can help you understand and acquire optimal bonds. Contact us today to get started.