For the businesses, professionals, and average individuals who are required to get surety bonds, it can feel like an unwanted expense and an extra hoop to jump through. That’s understandable. But surety bonds are also an important regulatory tool that are good for all. In fact, there are even benefits for the people who must pay for bonds and pay for claims. So yes, surety bonds are worth it. In this blog, we’ll explain why.
What is the Purpose of a Surety Bond?
A surety bond has two purposes.
- To hold someone accountable for misconduct that causes damage to another person resulting in financial losses.
- To ensure the party hurt by misconduct can seek and receive justice in the form of financial compensation.
Why Do I Need a Surety Bond?
The short answer is that you need a surety bond because it’s required by law, by a court, or by a contract. Surety bond requirements are a common feature or many official agreements because they incentivize upstanding behavior. They do that by holding the principal – the party required to get a surety bond – financially liable for misconduct.
Some people need to obtain a surety bond before getting a professional or business license. For example, most construction contractors will need to get multiple surety bonds before finalizing project contracts.Others may even need surety bonds to get utilities turned on.
In all cases, the main reason people need surety bonds is to minimize and mitigate the risk that the principal will fail to meet their contractual obligations or pay any obligated debt in the event of that failure.
When is a Surety Bond Required?
There are many instances (see previous paragraph) where surety bonds are required. In all instances, someone must prove they have the required bond before a process – i.e. granting a license, finalizing a contract, proceeding with a civil trial – can move forward. In all of these instances, it’s important to meet the surety bond requirements as quickly as possible to avoid unnecessary delays.
Fidelity bonds are the one example of bonds that are not required but are voluntary instead. Businesses get these bonds as they see fit. There are different types of fidelity bonds, but most protect a business and its customers/clients from losses caused by employee misconduct.
What Do Surety Bonds Cover?
One reason people may think that surety bonds are not worth it is because, unlike insurance, surety bonds don’t protect the bonded party, the principal. They protect the obligee who sets the bond requirements and files claims for damages when those requirements aren’t met. More plainly, surety bonds cover someone besides the person that pays for them. Nonetheless, they’re worth it for reasons we will explore below.
What Does a Surety Bond Cost?
Bond costs are personalized to the applicant. They are based on four factors:
- The type of bond
- The state where the bond will be issued
- The size of the bond
- The applicant’s credit standing.
In most cases, bonds cost a small percentage of the total size. People with challenged credit will pay more, but thanks to a special program from Viking Bond Service they won’t be automatically denied. If you decide that surety bonds are worth it, you can depend on Viking Bond Service to meet all your bonding needs.
Benefits and Drawbacks of Surety Bonds
As with anything, there are pros and cons to surety bonds:
Pros
- Meet surety bond requirements helps advance important processes
- Help keep unscrupulous operators out of sensitive industries
- Build trust with customers and the public at large
Cons
- Bonded parties must pay for bonds and any valid claims
- Lapse in bond coverage can invalidate a license or contract
- Required bonds renewals can add ongoing costs and hassle
Conclusion: Are Surety Bonds Worth It?
When you do a simple cost-benefit comparison, it’s clear why surety bonds are worth it. By getting a required bond, someone becomes eligible to start a business, begin a career, formalize an important agreement, or secure the trust of another party. All of these things have important and lasting benefits and positive implications.
In addition, costs are relatively small and manageable, especially when working with a quality surety agency like Viking Bond Service. And as long as a bonded party avoids anything that could result in claims, surety bonds aren’t much of a burden at all.
Viking Bond Service – Your Surety Bond Partner
At Viking Bond Service, we take the confusion, stress, and general burden of obtaining a surety bond off of your shoulders. We are a nationwide surety agency offering service in all 50 states. We connect bond seekers with hundreds of different bond types, including all the most common varieties. And with our experienced team on your side, you have all the information and assistance you could ever need.
Discover why so many others rely on us for all their bonding needs. Request a quote for a bond to begin exploring costs. Or get more information about anything bond related – contact us or call 1-888-278-7389.