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SURETY BOND DEFINITION

What is a surety bond?

A surety bond is a three-sided contractual agreement guaranteeing that a business or individual will fulfill their obligations under a contract and in accordance with business regulations.

The three parties involved in the surety bond agreement are the obligee (the party requesting a surety bond), the principal (the party obtaining the bond) and the surety (the surety company backing the surety bond financially).

How Surety Bonds Work

Surety bonds guarantee to the obligee that if the principal should fail to perform according to contract or regulations, the suerty will step in and cover for damages and losses that the obligee may sustain. In turn, the surety has to be indemnified by the principal for the backing it has extended. In this way, surety bonding functions like a line of credit to the principal.

Surety Bond Claims

Since claims on a bond are undesirable for everyone involved, it is advisable to avoid surety bond claims at all costs. However, as an active party to the surety bond agreement, surety bond companies usually extend their support and expertise to principals and help them avoid potentially dangerous situations.

What Does a Bond Cost?

This is our most common question and unfortunately its the one with the least straight forward answer. Though a commercial bond annual premium tends to fall between 1% and 14% of the bond size, this is a larger range and there can be exceptions. Read on to learn how to estimate where your bond cost should fall, and what you can do to reduce it.

How To Get Bonded

Are you new to Bonding? Learn the in’s and out’s of the bonding process as well as the five key pieces of information you will need to apply for your surety bond. This information will not just make the process smoother, but it can also help you reduce the cost of your surety bond.

Surety Bonds vs Insurance

Surety bonds and insurance are two completely different terms. Simply put, an insurance protects your business and surety bonds protect the public. If you want to get Bonded and Insured, the insurance aspect could refer to Fidelity Bonds, which protect your business from employee dishonesty.

Surety Bonds FAQ

Searching for answers that you just can’t find? Visit our surety bond FAQ page for a list of both common and uncommon questions. Still can’t find what you’re looking for? You can always call one of our knowledgeable agents and they will most certainly have the answer for you.

Auto Dealer Bonds

Freight Truck
  • Required by the state
  • Also known as the DMV Bond
  • Bond amount varies per state

Contractor License Bonds

  • Required by the local government
  • Needed to obtain a contractor license
  • Available bad credit bond program

Freight Broker Bonds

Freight Truck
  • No Collateral Required
  • All Credit Types Approved
  • Required by the FMCSA