If you run a small business or plan to launch one, you may be facing the prospect of surety bonding. Many small to medium-sized businesses (SMBs) pursue bonds to help them win contracts by providing the customer with a guarantee that the work will be completed. Some public and private contracts even require surety bonds on top of standard insurance.
Two common types of bond insurance are surety and fidelity bonds. Each of these has a specific use and is set up to ensure that what is agreed upon contractually or financially is followed through.
What Is a Surety Bond?
In finance, a surety, surety bond, or guaranty involves a promise by one party to assume responsibility for the debt obligation of a borrower if that borrower defaults. Whereas insurance is a two-party transaction between the premium payer and the insurer, a surety bond involves three parties: the principal (your business), a surety company, and the oblige, which is the organization requiring the bond.
The goal of the bond is to ensure that the contract bidder (the oblige) is not left with work unfinished by the contract bidder, or left with sub-standard work and that full payments are made to all suppliers and subcontractors. Surety bonds also address ancillary issues, such as ensuring the completion of requirements outside of performance or payment, such as maintenance. Essentially, it’s a way to provide added protection and indemnification to businesses.
What Are Fidelity Bonds?
Fidelity bonds are especially important for business owners because they offer protection against loss by the result of fraudulent or dishonest employees. This can cover anything from financial loss to property and even security losses. These bonds branch out further into first-party and third-party fidelity bonds to cover both employees and contracted workers for the business.
How Difficult Is It to Obtain a Bond?
The good news is that obtaining a surety bond is not as difficult or time-consuming as many companies might think. Depending on the type of bond your small business needs, your independent surety bond agent might have the ability to issue a bond in a day or less.
How Do I Get a Surety or Fidelity Bond?
In Connecticut, a Petruzelo Insurance agent can help you get the facts and information you need regarding bond insurance in the state to make sure you are operating within the law. We offer several types of bond services, including construction/contract surety bonds, or guarantees that contractors will fulfill their contracts. Both performance and payment bonds are required of contractors performing projects funded by federal, state, or municipal entities and may be required on projects for private entities.
We also offer bid bonds, performance and payment bonds, license and permit bonds, motor vehicle dealer bonds, employee dishonesty/crime bonds, fiduciary and court bonds, probate bonds, and Erisa bonds. In addition to bonds, Petruzelo Insurance offers personal and business policies that fit your needs and protect your home and business. Call us at 866-479-3327 or visit our website for more information.