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August 16, 2022

Are You a Contractor? You May Need a Surety Bond

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Do you have a client requesting a surety bond before entering into a contract? Or do you need help competing for larger contracts with government entities or other more established players? Surety bonds not only protect those you’re working for against financial loss, but they show that you’re a reputable business that can be trusted.

How Surety Bonds Work
As the person or group providing a service, you’re the principal in a surety bond. The person you’re doing the work for is the obligee. To ensure the contract is carried out, a third party acts as surety, making certain the principal carries out the work. If the principal fails in its obligations, the surety is financially responsible for hiring someone else to finish the job or otherwise paying costs.

Types of Surety Bonds
The two main types of surety bonds are contract and commercial. A contract bond has multiple sub-categories, but they basically all protect a project owner to ensure contractor bids and contracts are carried out properly. Commercial bonds are often required by government entities to ensure work is carried out in compliance with regulations to protect the public.

Obtaining Surety Bonds
To qualify for surety bonds, your business will need to show evidence of adequate capital and credit rating. You’ll need to demonstrate good management of past contracts and jobs as well as good budgeting and accounting records.

Koch Insurance Group can help you obtain the surety bond you need to obtain contracts. Give us a call today!

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