Understanding the Different Types of Surety Bonds

As part of the bustling Atlanta metropolitan area, businesses in Marietta, Georgia, must often account for changing circumstances and unexpected situations amid a fast-paced environment. This reality requires thoroughly understanding and implementing appropriate risk management and loss control measures, including surety bonds.

What Are Surety Bonds?

Available through many insurance companies, these financial instruments can cultivate financial security and client confidence for your organization and those with whom it enters into business agreements. Generally, surety bonds entail an agreement between the following three parties:

• The principal, such as your business, secures bonds if necessary.

• The obligee, such as your customer, determines if bonds are needed to safeguard their financial interests.

• The surety, such as an insurance company, underwrites and maintains the bonds.

If your company finds itself unable to deliver services as promised, surety bonds provide a way for your clients to recoup their losses without having to file a lawsuit.

Are There Multiple Types?

Indeed, surety bonds may come in many forms. The following are three of the most common subsets of surety bonds, applicable to many businesses’ needs:

• Contract bonds can help clients recoup losses if you’re not able to complete a project on time or up to agreed specifications. They may also be known as construction bonds and can come in various subcategories, such as performance bonds, supply bonds and maintenance bonds.

• License and permit bonds are often mandated by government agencies and may establish a means of compensation for affected parties if your business fails to abide by relevant laws and standards. This type may come in various industry-specific forms, such as auto dealer bonds and mortgage broker bonds.

• Fidelity bonds are essential if your business has access to clients’ property, as they can offer compensation if employees commit criminal or dishonest acts, such as forgery, theft and property damage.

We’re Here to Help

Contact Cadenas Insurance Agency today to learn more about surety bonds and find the right options for your business.