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June 25, 2022

3 Common Surety Bonds

Many people don’t know what surety bonds are, let alone the fact that there are many types of surety bonds available for purchase. When you hire a contractor, plumber, electrician or anyone else to perform work in your home or place of business, it’s beneficial to hire a bonded professional. Why? If that contractor does not complete the work as promised or makes a costly error, the company that issued his or her bond is responsible for any resulting financial losses, including hiring another professional to finish/fix the job. A surety bond acts as a guarantee that the principal will perform a job according to an agreed-upon contract. Below, we detail three of the most common surety bonds and their sub-categories. 

Commercial Surety Bonds a person sitting at a table using a laptop computer

  • License bond: Ensures that the bonded individual or business will obtain any required licenses or permits to meet city, county or state laws. 

  • Sales tax bond: Ensures that the bonded business will transfer all collected sales tax to the state government. 

  • Auto dealer bond: Ensures that a motor vehicle dealer is licensed and therefore legally qualified to sell vehicles for profit. 

Contract Surety Bonds 

  • Payment bond: Often issued with performance bonds, this ensures the payment of suppliers and sub-contractors for their contributions to the bonded project. 

  • Bid bond: Ensures that the bonded contractor who is awarded a project after placing a bid will post a performance bond and begin work on the project in a timely manner. 

  • Performance bond: Ensures that if a bonded individual or business doesn’t perform, the client can receive compensation for monetary loss. 

Fidelity Surety Bonds 

This ensures an employer’s protection from dishonest and/or fraudulent employees, including acts of theft and embezzlement.  

Tags: bonds, business, commercial, contract, fidelity, surety

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