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Surety and fidelity bonds are two common types of bonds businesses should consider. Surety bonds offer guarantees that your operations will meet contractual obligations or follow applicable regulations, and fidelity bonds provide coverage for employees’ dishonest acts.
The experienced professionals at Bob Putnam Agency in Worcester, New York, can help your business obtain the bonds that fit your needs. Contact us today for more information.
Surety bonds offer financial protection and peace of mind to your clients. A surety bond is a contract among three parties:
- The principal is the party that purchases the surety bond (e.g., your business).
- The obligee is the party that requires the principal to secure a surety bond. The obligee may be a governmental entity or private client.
- The surety is the party that maintains and underwrites the bond (e.g., an insurance company).
The obligee may file a claim against the surety bond if a principal fails to adhere to the bond’s terms. After an investigation by the surety, the surety may provide financial compensation to the obligee up the bond amount if the principal doesn’t resolve the issue. The surety will then typically seek repayment for that amount from the principal.
What Are Types of Surety Bonds?
There are multiple types of surety bonds, including contract surety bonds and commercial surety bonds.
Contract Surety Bonds
Contract surety bonds provide guarantees that businesses will fulfill the terms of a contract. They may also be required before work can begin on specific projects. Examples of contract surety bonds include the following:
Commercial Surety Bonds
- Bid bonds provide assurances that a business put forward a bid in good faith, and that they will begin a project if they are awarded the contract.
- Performance bonds provide guarantees that a business will complete a project in accordance with the contract’s terms.
- Maintenance bonds or warranty bonds provide guarantees that a business will remedy a finished project’s materials or workmanship flaw or that the project owner will be compensated for the defect. These types of bonds are usually effective for a specified term (e.g., one year).
- Payment bonds provide assurances that contractors will pay suppliers and subcontractors for their materials and labor.
Commercial surety bonds provide guarantees that a business will comply with specific requirements. For example, license and permit bonds provide assurances that a business will adhere to laws and regulations applicable to their industry, and a governmental body may required them before issuing a license or permit to a business.
Other types of surety bonds may be available. Contact your agent for details.
Fidelity bonds, also referred to as employee dishonesty insurance, are designed to help cover financial losses after employees’ dishonest acts, such as:
Coverage for other wrongful acts may also be available, as well as coverage for the dishonest acts of volunteers or individuals working for your company on a contract basis. Reach out to us for more information on terms and exclusions.
The team at Bob Putnam Agency can help your business secure the bonds you need. Contact us today to get started.
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