If you’ve ever visited a bar, bought a car, purchased a home, or worked with a contractor you’ve probably been protected by a surety bond. People often don’t realize that many of the businesses they use are required to have a surety bond. So why is this? State licensing requirements are designed to protect both the state and consumers from improper and unethical business activities.
What is a surety bond?
To understand how surety bonds protect consumers it’s important to understand how bonds work. Surety bonds are often confused with insurance, but unlike insurance, a bond doesn’t protect the bonded business. A surety bond is actually more like a line of credit than insurance. The surety agrees to pay claims made against the bond up to the bonded amount. A business is required to repay the surety company any money paid out on their bond.
How do surety bonds protect consumers?
Surety bonds provide an avenue for consumers to claim financial compensation should a business’s unethical activity cause them monetary loss. For example, if a person buys a car from a dealership that isn’t as described then the consumer can make a claim against the dealer’s surety bond. Without the surety bond in place, the consumer would have to take legal action to get compensation out of a business that refused to reimburse them.
In addition to providing protection for purchases, surety bonds also protect consumers who pay for services such as schooling, construction work, and financial advice. If a consumer receives unsatisfactory service or gets work that doesn’t meet the contracted terms then they’ll be able to make a claim against the business’s surety bond to get financial compensation. These surety bonds ensure that a consumer gets the product or service they paid for or receives compensation even if the business is unwilling to reimburse them for financial loss.
Surety bonds also protect businesses.
Although surety bonds can feel like an annoyance and unnecessary expense to a business owner they do actually offer long-term benefits. The major benefit for a business is the added layer of trust consumers have in ‘licensed and bonded’ businesses. Another key benefit is that they help to regulate industries by preventing unethical businesses from operating. This helps to improve the image of the industry and reduces competition from unethical competitors who offer low prices but provide a poor service!
Viking Bond Service is a premier bonding company offering affordable surety bonds in all 50 states. For help finding a surety bond today call, email or use our online application form to get started!