No matter what kind of industry you’re in, owning a business involves risk, which is why it’s important to make sure you’re properly insured against financial losses. However, just as you need coverage to protect your operations, those who decide to utilize your services also need to feel secure. As such, you may be required to carry surety bond insurance, which acts as a guarantee that you’ll follow through with the work you’ve agreed to provide. The following information offers a better understanding of exactly what surety bonds are.
How Do Surety Bonds Work?
A surety bond is a written contract that involves a three-party agreement. The principal is the party that purchases the bond insurance and assumes responsibility for fulfilling a specific obligation, and the surety is an insurance company or surety agency that promises the obligation will be performed. An obligee is a party that requires the bond. Surety bonds are usually a requirement for professionals who need to get licensed or are looking to engage in a particular business activity.
Who Do Surety Bonds Protect?
Unlike traditional insurance policies, surety bonds aren’t typically designed to protect the party who buys the coverage, but rather the party they do business with. As long as the principal satisfies the terms of the surety bond, nothing else will happen. If the principal fails to meet their contractual obligations, the obligee can file a claim for compensation. When claims are proven to be valid, the surety is liable for paying the obligee’s losses, and the principal will have to provide reimbursement.
What Are Some Common Types of Surety Bonds?
A wide range of businesses need surety bonds, so there are many different types available. Two of the most common include contract bonds for construction companies, and license and permit bonds for professions such as auto dealerships, mortgage brokers, contractors, health spas, and employment agencies. There are also public official bonds for those who hold a public office and fidelity bonds to safeguard companies against employees who participate in dishonest activities.
If you must purchase surety bond insurance, turn to 1st Choice Insurance in Fairfield, OH. They have the unique experience and knowledge to help take care of all your bonding needs. For more than 30 years, this family-owned and -operated agency has been entrusted to provide business owners throughout the Greater Cincinnati area with high-quality products designed to protect and improve their bottom line. Call (513) 860-0666 to schedule an appointment, or visit them online for more information on how they can assist you.