regulatory or fiduciary contract compliance

Guarantee your contract obligations and regulatory compliance with the right insurance bond

Being “bonded” and “insured” are not the same thing -- to be properly protected, you’ll likely need both

What is an insurance bond?

Before we can answer this, we should probably say what an insurance bond is not. A bond is not an insurance policy.

An insurance policy is an agreement between the insured (you) and the insurance company, whereby the company agrees to pay for certain claims in return for you paying a premium.

A bond (also called surety bond) is an agreement between three parties - the principal (the person purchasing the bond), the obligee (the person who receives the benefit) and the insurance company.

An insurance bond is not meant to pay for claims. It is meant to provide a financial guarantee that the person or entity purchasing the bond (the principal) will reimburse the obligee should the principal default, fail to fulfill its obligations, or a claim is made.

So an insurance bond is meant to prove or support the financial stability of the entity purchasing the bond.

Does my business need to be bonded?

It depends.

You may be legally required to be bonded per the state, an industry association, or a contract you’ve signed.

In addition, if you perform services in someone else’s home or business, or you or your employees have access to money, you may wish to be bonded for extra protection.

Finally, if you are involved in any construction work, you may also benefit from the additional protection from an insurance bond.

What types of insurance bonds are available?

There are many types of insurance bonds available, but the most common are public official bonds, license and permit bonds, fidelity bonds, and contract bonds.

A public official bond is designed to guarantee that you will faithfully perform the duties of your office (whether elected or appointed).

A contract bond is used to guarantee fulfillment of your construction contractual obligations.

A license and permit bond is used to satisfy the requirements of a government agency, such as your local city or town.

A fidelity bond can be used to protect your business from fraudulent acts committed by your employees.

As a business, you may need one or all of these insurance bonds, depending upon your contractual and regulatory requirements.

Which type of insurance bond do I need?

Depending on your business needs, you may require one or all of these types of bonds.

License and Permit Bonds

License and Permit bonds are used to satisfy requirements by a government agency. Some common examples of license and permit bonds are:

Professional licensure bonds (i.e. real estate, insurance, etc.)
Mortgage broker or lender bonds
Notary bonds
Private investigator bonds
Auto dealer bonds
Street repair, drain laying, demolition or street opening permit bonds
Auctioneer bond
Collection agency bond
Travel agency bond

Contract Bonds

A contract bond is used to guarantee the work of the contractor will follow the specifications in the contract or bid. Some common examples of contract bonds are:

Bid Bond: guarantees that if you are awarded a job, you will comply with the bid specs. This bond typically does not cost you anything!
Performance Bond: requires the contractor to finish a job on budget and on deadline. (usually combined with a Payment Bond)
Payment Bond: provides your subcontractors and vendors a guarantee that they will be paid for their work on the job.

Public Officials Bonds

A public official bond is used to guarantee the performance of duties for someone who is accountable to the general public. Typically these are issued to persons responsible for handling money. Some common examples of public official bonds are:

Tax Collector
Treasurer/Assistant Treasurer
Town Clerk
Constable
Subordinate handling money

Fidelity Bonds

Fidelity bonds are used to protect your clients from the actions of your employees. Some common examples of fidelity bonds are:

Employee theft/dishonesty bonds
Janitorial service bonds
ERISA (Employee Retirement Income Security Act) bonds
Probate or Executor bonds

Got insurance bond questions? We’ve got answers.

An insurance bond may not be required for your business, but it is something you may want to consider. Let us help you decide whether this coverage is right for your business.

When should I get bonded?

What will I need to provide to get bonded?

If I have professional liability insurance, do I need an insurance bond?

How much does an insurance bond cost?

Simplifying insurance bonds … one blog at a time

Find the answers to all your insurance questions through the helpful resources in our free online Learning Center.

Our clients are like family. See what they are saying…

Our clients are like family. See what they are saying...

“[Berry Insurance] helped me out with getting a bond for our new Treasurer/Collector very quickly. The first insurance company denied the bond and [they] quickly found another company and got the bond [issued].”

Holly Y., A Massachusetts City/Town Official

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Satisfy all your protection needs with the proper insurance bonds

Fulfill all your contractual and fiduciary needs with the right bond insurance program. Simply fill out this form and a member of our commercial insurance team will be in touch.

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