Business is a risk. Some business industries are riskier than others. A surety bond is a tool that protects parties who contract others to complete a specific service for them. If the obligation is not fulfilled and it results in a financial loss for the bond holder, the losses can be recovered through the guarantee of the bond. An example of a surety bond is an employee dishonesty bond.
Here are three surety bond facts to consider.
How Do I Obtain a Surety Bond?
Some estimate that 50,000 types of surety bonds exist. When you are interested in obtaining a surety bond, you will do so at the state level. Based on your state, certain laws and regulations must be satisfied. If you need help finding the bond that best meets your needs, you can work with professionals well-versed in the area. Once the required bond is found, they can help with the purchase.
Am I Required to Obtain a Surety Bond?
Some industries are more prone to malpractice and fraud, therefore, if you operate in one of those industries, you will be advised to go ahead and obtain the bond. Government entities are prone to malpractice and fraud, so on all projects, they obtain a bond when they award a contract to a private entity. The construction industry, due to the potential of delays in projects, is also an industry that has a high surety bond percentage in the form of contract bonds. Commercial bonds are often obtain by individuals in industries that require licensing.
What are Common Surety Bonds?
There are four major surety bond categories. In addition to commercial and construction bonds, licensing bonds and court bonds make up the other two major categories. Court bonds include probate, executor and guardianship while licensing bonds are obtained by auto dealers, contractors and freight brokers.
In these litigious times, a bond is a tool that protect industries prone to fraud and malpractice against financial losses. An employee dishonesty bond protects the bond holder against financial loss due an employee who steals, embezzles or forges checks.