If you’re in business for yourself, you’re probably already well aware of the importance of surety bonds to your company and to business in general. In fact, most industries deal with surety bonds, generally as a result of state, local, or federal regulations, and while many people may not be familiar with surety bonds themselves, most recognize the term “licensed and bonded.”
The bond amount varies from industry to industry, and can range from less than a thousand dollars to over half a million. Looking at some Illinois surety bonds, for example, roofing contractors are required to be bonded for $10,000, and loan brokers for $20,000.
Surety bonds are an agreement between three parties: the surety company, the party requiring the bond (usually state, local, or federal government), and the business that is required to purchase and maintain the bond. If the bonded business is ever found to have engaged in harmful fraudulent or unethical behavior, the party requiring the bond can file a claim on behalf of the wronged party. If the claim is found to be valid, the surety company will pay damages up to the full face value of the bond and then pursue the bonded business for reimbursement of those damages. Since the bonded business is ultimately responsible for the claim amount and receives no coverage for damages under the bond, a surety bond cannot be considered insurance.
Becoming licensed and bonded is a reasonably straight-forward process. Companies that need to purchase a bond can either contact their local bonding agent or can take advantage of the many internet based surety companies. The surety company will perform a thorough financial evaluation on the prospective bond holder to ensure that they are financially able to meet the terms of the bond should it become necessary. Companies with poor or no credit history who are denied a bond through a surety company can apply for a bond with one of the companies who specialize in sub-par credit bonds, though rates will be significantly higher than average.
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Thanks for sharing nice article. I’m comletely agree with your ideas. However I’d like to add a bit. If you are in business for youself then ever cent becomes of great importance for you.
I agree
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