Surety bonds are required by law for many types of businesses, including construction companies, contractors, and government agencies. They’re also used in other industries, such as manufacturing and transportation.
This article will explain what they are, how they work, and why they’re important.
Surety bonds are insurance policies that protect a business from financial losses if its employees fail to perform their jobs. If an employee leaves the company before completing his or her contract, the employer must pay back any money he or she has earned while employed.
What Are Surety Bonds?
Surety bonds are used by businesses to ensure that their employees will complete their work without leaving the company. These bonds are often required by law, so employers should check with their local government to see what type of bond is needed.
Why Should You Have One?
Surety bonds are designed to protect companies against losses caused by the actions of their employees. If an employee leaves the company before completing his or her assigned tasks, the employer must pay back any money lost as a result of the employee’s failure to do his or her job. This protection is especially important when dealing with contractors who provide services to the business.
Types of Surety Bonds
There are two main types of surety bonds: performance bonds and payment bonds. Performance bonds guarantee that the contractor will complete the work he or she was hired to do. Payment bonds ensure that the contractor will pay subcontractors and suppliers for work completed.
The Process of Obtaining a Surety Bond
To obtain a surety bond, a business must first apply with the bonding company. Once approved, the bonding company issues a contract to the applicant. This contract outlines the terms of the bond, such as how much money the applicant will need to put up as collateral, what type of bond (performance or payment) the applicant wants, and when the bond expires.
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