Bonding actually bears little relationship to typical insurance products. While the payment of an insurance loss is the result of an unforeseen occurrence, a bond is a financial guarantee, almost like a line of credit.
What is a surety bond?
A surety bond is a contract between three parties; the principal (you), the surety (insurance company) and the obligee (the entity requiring the bond)—in which the surety financially guarantees to an obligee that the principal will act in accordance with the terms established by the bond.
Our commercial insurance experts can help you understand how surety bonds can work for your business.
Bonds are financial guarantees required to secure a contract or license
There are many different types of bonds available to fill requirements for business clients who need to provide a secondary financial guarantee. Some examples are:
A bond filed with a bid for a construction or other project which guarantees that if the contractor is awarded the job, the contractor will fulfill the contract at the bid price and the required performance bond will be issued.
Contractor performance, labour and material payment bond
Contract bonds assure owners that the surety (insurer) stands behind the contractor and if the contractor fails to fulfill its contractual obligations the surety (insurer) guarantees to do so, at no cost to the owner.
License & permit bonds
License and permit bonds are often required by both Federal and Provincial Government and are part of a government body that protects the consumer. The bond protects the consumer against fraud, misrepresentation and potential financial loss. The bond also ensures the company applying is in compliance with the regulations governing that particular sector. Examples are:
- Electrical safety act bonds
- BC safety authority bonds
- Travel agent bonds
- Financial institution bonds
- Customs & excise bonds for taxation, for bonded warehouses, highway freight and air carrier.
Fiduciary and probate bonds
Fiduciary and probate bonds are filed with courts. These bonds are required by the courts or Public Trustee when a person passes away or becomes incapable of taking care of their own affairs. Examples are:
- Probate Bonds
- Guardian Bonds
- Administration, Executor Bonds
- Trustee Bonds
Who might use surety bonds?
- Services or professionals
- Building contractors
- Environmental sites
- Transportation companies
- Auto dealers
Discover more about our commercial business insurance policies. For more information about our commercial insurance offerings and to determine what coverage is best for your business, contact us.