What is a Surety Bond?
When you are working on any sort of project, both parties want assurances that the job will be completed in a timely manner, both sides will meet their obligations, and the matter will be closed when the work is done. To this end, surety bonds offer protection for both sides.
Briefly, a surety bond is a contract that involves your business, your client, and the entity that issues the bond. Read further to learn how surety bonds work, how your contracting outfit can make use of them, and when you should offer them upfront to clients.
What Type of Bond Do You Need?
What’s interesting about surety bonds is that they come in all shapes and sizes. You don’t buy a singular surety bond that works for everything from a construction project to a guardianship.
As a contractor, you can purchase specialty contractor bonds that are designed to protect you and your clients financially. However, there are other types of bonds available to the consuming public, including:
- Auto dealer bonds
- Contractor bonds
- Freight broker bonds
- Performance bonds
- Supply bonds
- Maintenance bonds
- Janitorial service bonds
- Utility bonds
- Lottery bonds
- Probate bonds
- Executor bonds
- Guardianship bonds
How Does a Surety Bond Work?
A surety bond is a promise to fulfill a contract or obligation. The process for using a surety bond is:
- The contractor or construction company purchases the bond
- The client holds the bond in the event that the contract is not fulfilled
- The surety (or entity that issues the bond) can provide a line of credit to the client when the contractor or construction company does not fulfill its obligations
Who Needs Surety Bonds?
Surety bonds are a necessity for a majority of construction and remodeling projects. When you, as a contractor, purchase the surety bond, you are giving the client financial assurance that they can recover their funds in the event that you cannot complete the job.
Plus, angry customers exist. They could say anything. Instead of paying out of your own pocket for the total cost of the job, the client will file a claim against the bond and recover those funds.
Surety bonds are also helpful for:
- Artisan contractors
- Plumbers
- HVAC contractors
- Electricians
- General contractors
- Construction companies
- Independent contractors
Contact The Dale Group for More Information on Surety Bonds
When you need assistance with surety bonds and other forms of contractor’s assurance and insurance, reach out to our team at The Dale Group. We’re happy to explain how surety bonds work for each project, write new insurance policies, or review your current coverage. Keeping your insurance portfolio in good standing is the best way to protect your business and your clients.