Surety bonds

Larger clients and government agencies often require proof of a surety bond before they'll work with your business. State laws also mandate bonds for certain professions.

Even the most reliable business could suddenly lose a valuable employee, or run out of needed materials due to a supply chain disruption. Surety bonds provide a guarantee that your client won't lose money if your business unexpectedly can't fulfill its obligations. It's a key part of risk management when small businesses take on big projects.

Even when it’s not required, a commercial surety bond is a way to prove your small business is reliable. It may give you an edge over non-bonded competitors, which could mean the difference between winning or losing a project.

A surety bond guarantees that your client will receive financial reimbursement in the event your business fails to complete a project or fulfill the terms of a contract. They also help small businesses obtain necessary licenses and permits.

Specifically, surety bonds often provide coverage for:

Surety bonds protect professionals in many different industries, and there are different types of bonds for the unique risks they face. You may need a bond to bid on a project, get a license, or obtain a work permit, depending on your industry and the type of work you do.

Here are a few examples of the top professions that rely on surety bonds or are required to carry them.

While a surety bond protects your clients from financial loss, it does not protect your own business against damages or losses. In fact, your business is responsible for paying back any amount paid by a bond to a client.

That's why you also need small business insurance. For instance, a surety bond does not include coverage for:

While surety bonds protect your customers against a financial loss, you'll need to protect your own business against risk. These policies are often purchased by small business owners:

General liability insurance: This policy covers expenses related to client injuries and property damage, such as a slip-and-fall injury at your business. 

Business owner’s policy (BOP): bundles general liability insurance with commercial property insurance. It typically costs less than if the policies were bought separately.

Workers’ compensation insurance: This policy covers medical bills and disability benefits from work-related injuries and illnesses. Most states require technology businesses with employees to purchase workers’ compensation.

Commercial auto insurance: This policy is required in most states for business-owned vehicles. It can cover property damage and medical bills in an accident involving your IT company's vehicle, along with theft, vandalism, and weather damage.

Surety bonds do not work like standard small business insurance policies, which pay out claims to the policyholder. Instead, surety bond claims are paid to the client (also called the obligee). For example, if your small business fails to complete a construction project, the surety company will reimburse your client.

Unlike an insurance policy, you must pay this amount back to the insurer or surety bond company. In a way, a surety bond is more like a line of credit than insurance.

A surety bond offers a financial guarantee that an insurance company will reimburse your client if your business doesn’t complete a project, breaks the terms of a contract, or fails to adhere to regulations.

It's easy to get a surety bond and business insurance with Insureon.

First, fill out our free online application to get quotes for general liability insurance, workers' compensation insurance, and other policies. Then, chat with an agent if you'd like to add a surety bond to your coverage.

We'll help make sure you get the right coverage, without paying too much for insurance and bonds.

A surety bond is a financial guarantee that a contract will be completed. A fiduciary bond, also known as a court bond, probate bond, or estate bond, is a type of surety bond used in financial and legal situations.

Government entities, such as probate courts, often require anyone performing a fiduciary role to have a fiduciary bond. A fiduciary role refers to someone managing the property and assets of someone else, such as a financial advisor, guardian, or someone overseeing the execution of a will.

Yes, an indemnity bond is a type of surety bond that ensures that a party receiving funds from another will be paid according to a contractual agreement. Indemnity bonds are commonly used in commercial contracts, leases, and other licensing or loan agreements.

A company is bonded when it has a surety bond. It's insured when it has other insurance policies, such as general liability insurance or workers' compensation insurance. Finally, it's licensed when it has obtained the licenses necessary to operate legally.