{"id":1262,"date":"2021-08-25T21:04:22","date_gmt":"2021-08-25T21:04:22","guid":{"rendered":"https:\/\/www.performancesuretybonds.com\/blog\/?p=1262"},"modified":"2022-01-24T16:03:31","modified_gmt":"2022-01-24T16:03:31","slug":"surety-bonds-are-they-worth-it","status":"publish","type":"post","link":"https:\/\/www.performancesuretybonds.com\/blog\/surety-bonds-are-they-worth-it\/","title":{"rendered":"Surety Bonds, Are They Worth It?"},"content":{"rendered":"\n

For the businesses, professionals, and average individuals who are required to get surety bonds<\/a>, it can feel like an unwanted expense and an extra hoop to jump through. That\u2019s 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 <\/em>pay for claims. So yes, surety bonds are worth it. In this blog, we\u2019ll explain why.

What is the Purpose of a Surety Bond?<\/strong><\/p>\n\n\n\n


A surety bond has two purposes. <\/p>\n\n\n\n

  1. To hold someone accountable for misconduct that causes damage to another person resulting in financial losses. <\/li>
  2. To ensure the party hurt by misconduct can seek and receive justice in the form of financial compensation. <\/li><\/ol>\n\n\n\n

    Why Do I Need a Surety Bond?<\/strong><\/h2>\n\n\n\n

    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 \u2013 the party required to get a surety bond \u2013 financially liable for misconduct. <\/p>\n\n\n\n

    Some people need to obtain a surety bond<\/a> 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. <\/p>\n\n\n\n

    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.<\/p>\n\n\n\n

    When is a Surety Bond Required?<\/strong><\/h2>\n\n\n\n

    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 \u2013 i.e. granting a license, finalizing a contract, proceeding with a civil trial \u2013 can move forward. In all of these instances, it\u2019s important to meet the surety bond requirements as quickly as possible to avoid unnecessary delays. <\/p>\n\n\n\n

    Fidelity bonds<\/a> 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. <\/p>\n\n\n\n

    What Do Surety Bonds Cover?<\/strong><\/h2>\n\n\n\n

    One reason people may think that surety bonds are not worth it is because, unlike insurance, surety bonds don\u2019t protect the bonded party, the principal. They protect the obligee who sets the bond requirements and files claims for damages when those requirements aren\u2019t met. More plainly, surety bonds cover someone besides<\/em> the person that pays for them. Nonetheless, they\u2019re worth it for reasons we will explore below. <\/p>\n\n\n\n

    What Does a Surety Bond Cost?<\/strong><\/h2>\n\n\n\n

    Bond costs<\/a> are personalized to the applicant. They are based on four factors:<\/p>\n\n\n\n