5 Types Of Surety Bonds For Financial Protection

Surety bonds offer business owners a legal guarantee to performance. As a business owner, you need all of the protection you can get in order to continue to grow your company without risk. Obtaining relevant surety bonds is a great way to achieve the security you need. These types of bonds work by involving three parties in the agreement. The business owner (also known as the “obligee”) receives a guarantee from the surety. The surety guarantees the performance of the agreed upon obligation by the principal. Read this post to understand the most common types of surety bonds for businesses so that you can protect yours. 

Contract Bond

One of the main types of surety bonds for businesses is the contract bond. This type of surety bond guarantees that your contractor will complete the work they agreed to. Moreover, it states that the contractor will properly pay their employees during the project. Contractors, who are the principals in this situation, are the ones who purchase this type of bond. Most large construction companies, general contractors and trade contractors purchase this contract bond. Keep it in mind when determining which types of surety bonds you need for your business. 

Judicial Bond

Another type of surety bond to consider is judicial bonds. These bonds are often referred to as “court bonds” because they come in handy for business owners entering court cases. There are multiple types of judicial bonds to keep in mind. For instance, bail bonds benefit business owners undergoing criminal cases. Meanwhile, business owners involved in civil cases typically use appeal bonds, attachment bonds and injunction bonds. These types of bonds protect business owners through legal matters. Whether your business is being sued or not, you should keep this surety bond in mind. Judicial surety bonds can protect you during a future lawsuit. 

License And Permit Bond

Additionally, license and permit surety bonds are the most common for business owners. Most trades require business owners to obtain a professional license within the industry. For instance, auto dealers need professional licenses in order to legally conduct business. If you work in an industry that requires you to obtain a license and/or permit, you likely need to post a license and permit bond. Depending on the state or local law ordinances, a license and permit surety bond could keep your business compliant with the law. The process to apply for a bond is fairly simple. Moreover, the issuance can be done within minutes. Apply online, get a quote and await your application to get approved. Do not hesitate to apply if you need this type of surety bond. 

Fidelity Bond

Fidelity bonds also offer business owners the guarantee that they need. This type of surety bond protects business owners on an internal level. Unfortunately, business owners suffer losses due to dishonest employees frequently. Such employees conduct fraudulent activities within their companies. While you should always foster a company culture of high integrity, loyalty and ethics, sometimes employees make the wrong choices that could have damaging impacts on the business. Fidelity surety bonds protect business owners when they suffer losses caused by this type of fraudulent activity. Because the losses can be significant and because all companies are at risk of employing dishonest workers, every business owner should apply for a fidelity bond. 

Business Service Bond

Finally, business service surety bonds are worth looking into. These surety bonds entail protecting customers from dishonest employees. If an employee steals information or items from one of your customers, your company would be at fault. In turn, you could get sued by the customer. When companies have business service bonds, however, they stay protected during such an instance. This type of surety bond offers security for the customer, which protects your company from a lawsuit and from building a bad reputation. Thus, consider getting a business service surety bond.

If you want to grow your company with as little risk as possible, you need to get surety bonds. To determine which ones you need, you need to familiarize yourself with the most common types for businesses. For instance, many business owners in the construction industry get contract bonds. Judicial bonds protect business owners during criminal and civil lawsuits. Business owners need license and permit bonds when they work a trade. Fidelity bonds offer protection against dishonest employees. Business service bonds provide customers with security against any dishonest workers that you may employ. Consider these common types of surety bonds for businesses.