Three Kinds Of Surety Bonds And When To Use Them
As a business owner, there may be times when you need to take out a surety bond. A surety bond is a contract that ensures you and the person for whom you are doing work both meet the conditions of a contract. Essentially, it is a type of insurance policy. If you don't meet the obligations of the contract, the bond will pay the other party who has signed the contract. If the other party does not meet their obligations, you'll be paid.
When you need to take out a surety bond, it's important to ensure you take out the right type. Here are three common varieties and when they are used.
Construction Surety Bonds
If you are a construction company doing work for a client, you should take out a construction surety bond. What the bond guarantees is that your company does the work you specify in the contract. The bond also protects your company since it guarantees that the client will pay you for the specified materials and labor. Your company will be evaluated before the bonding company agrees to issue the bond, so approval of the bond will affirm to your customers that they are working with a reputable business.
Commercial Surety Bonds
If you are doing work on a commercial space, you will want to take out a commercial surety bond. What this bond guarantees is that the work you do meets building codes for the industry. If your client later finds that your work does not meet codes, they can collect money to make changes through the bond. There are different types of commercial bonds for different industries. For instance, if you're working on a car dealership, you can take out an auto surety bond. If you're working on a liquor store, you can take out a liquor bond.
If you are a business owner with employees, then you absolutely need to take out a fidelity bond. What this bond protects against is theft -- and especially theft performed by your employees. Employee theft is more common than you might think, and it can really add up before you notice anything is amiss. When you have a fidelity bond, you can get reimbursed for employee theft up to the amount specified in the bond, which may keep your business from going under.
To learn more about surety bonds and the type that's best for you, reach out to a bonding company.