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Securing bonds can be beneficial for your business by helping to build trust with your clients. In some cases, bonds may be required. Two common types of bonds are surety bonds and fidelity bonds. Surety bonds provide assurances that you will fulfill contractual obligations or meet applicable regulations, and fidelity bonds can protect against employees’ dishonest acts.
Strickler Insurance can help you secure the bonds your business needs. Contact us today to get started.
A surety bond is a contractual agreement among three parties:
The principal—the party that purchases the surety bond.
The obligee—the party (governmental or private) that requires the principal to purchase a bond.
The surety—the entity that underwrites the bond (e.g., an insurance company).
Surety bonds provide assurances that a contract’s terms will be fulfilled or that businesses will meet specific regulations. If a principal does not adhere to the surety bond’s terms, the obligee may file a claim against the bond, and the surety may investigate that claim. After being notified, the principal will typically have an opportunity to resolve the issue, but if they don’t, the surety may provide financial compensation to the obligee. Then, the surety will seek reimbursement from the principal for that amount.
Types of Surety Bonds
There are numerous surety bonds, but two common types are contract bonds and commercial bonds.
Contract bonds provide guarantees that a contract’s term will be fulfilled. They may be required before work can begin on a project. Examples of contract bonds include:
A bid bond, which guarantees a contractor will begin a project if they are awarded a contract. It also provides assurances that a bid was submitted in good faith.
A performance bond, which guarantees a project will be finished in accordance with the contract.
A payment bond, which guarantees that contractors will compensate subcontractors and suppliers for their work and materials.
A maintenance bond, which guarantees a defect in materials or workmanship will be fixed. These bonds are typically effective for an established term (e.g., 12 months).
Other contract bonds may be available. Contact your Strickler Insurance agent for more details on options.
Commercial bonds provide assurances that a business will comply with specific statutes. For example, license and permit bonds guarantee that a company will comply with laws and regulations applicable to their industry.
Fidelity bonds are a type of business insurance that protects your business against employees’ dishonest acts. There are two types of fidelity bonds:
First-party fidelity bonds, which provide protection if an employee engages in a dishonest act (e.g., fraud, forgery, theft).
Third-party fidelity bonds, which provide protection if an individual working for you on a contract basis engages in a dishonest act.
Contact Us Today for More Information About Bonds
The agents at Strickler Insurance can help you navigate the complexities of securing the bonds you need. Contact us today for more information.