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Surety bonds
Build customer confidence in the reliability of your small business with a surety bond from a trusted insurance company.
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What is a surety bond?
A surety bond is a contract between a principal (an individual or business), obligee (entity requiring the bond), and surety (bond issuer) guaranteeing that the principal will meet contractual obligations to the obligee. If a bonded business fails to deliver guaranteed services and end product, the bond issuer will compensate the obligee according to the terms specified in the bond.
What are the benefits of having a surety bond?
Having a surety bond benefits your small business by:
- Providing a guarantee against any doubts about your reliability, giving your customers peace of mind
- Improving your reputation in the industry, which can attract more business
- Leaving the mediation and settlement of contractual disputes to a neutral third party
- Helping prevent lawsuits, saving your business time and money
- Meeting requirements for state licensure
Small businesses with both a surety bond and liability insurance - typically referred to as 'bonded and insured' businesses - tend to win new contracts more often than those without these customer protections.
Note that some larger businesses and government organizations will require you to have a surety bond before they do business with you.
Why choose Liberty Mutual for a surety bond?
Why work with independent insurance agents
What kinds of surety bonds do small businesses need?
While there are many types of surety bonds, some are far more common for small businesses than others.
License and permit bonds are often part of state licensing requirements for certain professionals, such as
- Carpenters
- Electricians
- Flooring contractors
- Plumbers
- Painters
- HVAC system servicers
Without a surety bond, these skilled tradespersons would not be able to obtain a license to do business in many states.
Business service bonds, or fidelity bonds, protect a business from financial losses caused by employee dishonesty or illegal conduct. Businesses that commonly need business service bonds include cleaning, repair, and moving companies.
Contract bonds, or construction surety bonds, are project-specific bonds required by certain clients before you can bid on and complete certain public projects. They provide specific job obligations and standards for which, when not met, the client can seek compensation from the bond-issuer.
Surety bond insurance frequently asked questions
Many commercial insurance companies offer surety bonds as a complement to business owner's policies for small businesses.
Your best bet is to speak with an independent agent about all of your insurance needs, including surety bonds.
The cost of a surety bond is normally a percentage of the total bond amount. The price varies considerably and depends on multiple factors, including
- Bond coverage amount
- Type of bond needed
- Years of industry experience
- Credit history
- Number and size of prior bond claims
Generally speaking, businesses with significant industry experience, strong credit histories, and limited prior bond claims will pay less for a surety bond.
- The 'surety' is the party issuing the bond, typically an insurance company or bank.
- The 'principal' is the business that purchases the surety bond and delivers the bonded service or end product.
- The 'obligee' is the client who can make a claim against the bond to the surety if the principal fails to meet its contractual obligations.
Individuals may also need notary, public official, and probate bonds.
Protect what you've worked
hard to build
hard to build
Take the first step by getting a quote now or finding an independent
agent who can help you choose the right coverage options.