Surety Bonds

Business Insurance for Surety Bonds

Surety bonds are three-party agreements that guarantee your performance, payment, or compliance with specific obligations. The surety company guarantees to the project owner or obligee that you will fulfill your contractual or legal obligations. Unlike insurance, bonds protect the party requiring the bond, not you.

Why Your Business Needs This

• Many contracts require performance and payment bonds before work begins
• Government projects mandate bonds for most contractors
• License and permit bonds are required for many business activities
• Bonds demonstrate financial strength and reliability to clients

What It Covers

Contract bonds include bid bonds guaranteeing you'll enter into the contract if awarded, performance bonds ensuring project completion according to contract terms, and payment bonds guaranteeing payment to subcontractors and suppliers. Commercial bonds include license and permit bonds required by regulatory authorities, court bonds for legal proceedings, and public official bonds. The surety pays claims if you fail to fulfill your obligations, then seeks reimbursement from you. You remain ultimately liable for bond claims.

How Do You Qualify for Surety Bonds?

Surety underwriting evaluates your character, capacity, and capital. They review your financial statements, credit history, experience, and work in progress. Strong financials, good credit, proven track record, and adequate working capital improve your bonding capacity. Building bonding capacity takes time and consistent performance.

How Much Do Bonds Cost?

Bond premiums typically range from one to three percent of the bond amount, depending on bond type, project complexity, and your qualifications. Stronger financial position and better credit result in lower premium rates. Small bonds under a certain threshold may have minimum premiums regardless of bond amount.