Surety bonds come in all different shapes and sizes, depending on your business needs, but they are designed to do one thing – protect everyone involved in a contract.
Most surety bonds protect the customer who hired you to complete a job. Others, like fidelity bonds, protect both the customer and your business. Charlotte Insurance understands the different types of surety bonds and can help you make a more informed decision for how best to protect your business and your customers.
A surety bond is a legal document guaranteeing the completion of a contract. It requires the person performing the job to pay a specific amount of money to a bond company in order to guarantee performance. You, as a business owner, may pay to give your customer peace of mind. Alternatively, you may require independent contractors or subcontractors who work for you to pay to guarantee the work that you hire them to do is completed properly.
Fidelity bonds are a type of surety bond designed to protect your business and your customers. Depending on the type of bond you purchase, you may be covered against specific types of loss:
- Employee theft and dishonesty
- Loss due to false or forged documents – these documents would have been used in good faith but caused a loss when the forgery was discovered.
- Loss due to counterfeit or unauthorized instructions – forged signatures on checks, theft of customer information, unauthorized use of bank account information
- General theft and fraud
In the case of fidelity bonds, the loss experienced affects both your customers and your business, both of whom must be protected. While there are specific limitations with fidelity bonds, they can give you, as a business owner, peace of mind.
Contractor and Construction Bonds
There are some bonds that only contractors will be required to carry or have the option of carrying.
- Contractor License Bonds: These bonds may be known as “contractor bonds” and are often required by local governments to guarantee that local licensing laws are followed.
- Construction Bonds: These bonds are typically called “contract bonds” which can include bid bonds, payment bonds, performance bonds, and maintenance bonds. There are also supply bonds, site improvement bonds, and subdivision bonds. The specific type of bond a contractor needs will depend on the project type and requirements.
Types of Construction Bonds
Many of the bonds available protect against very specific situations. The purchase of these bonds can be used to show your customers and clients that you take their job seriously and that you guarantee completion of the work to be done. Some bonds protect your business directly ensuring that you are paid for your work.
- Bid Bonds: These bonds make sure that those who bid on a contract will enter into the agreement.
- Payment Bonds: This type of bond makes sure that you are paid for the work you perform.
- Performance Bonds: This bond guarantees that whatever is outlined in the contract will be completed correctly and properly.
- Maintenance Bonds: This type of bond ensures that maintenance and warranty provisions within your contract are carried out to the letter.
There are many types of surety bonds available for businesses. Depending on the type of business you operate, you may need simple surety bonds to ensure the completion of a contract or you may need something more specific like a fidelity bond or construction bonds. Understanding the different types will help you make a more informed decision.
When you’re ready to discuss the details, give us a call. We can help you figure out what’s best for your company.