How to Purchase a Surety Bond

A surety bond is issued by an entity to protect buyers or purchasers of services and guarantee that they don't incur a loss if a seller or provider of services fails to fulfill its obligations. Here's how you purchase a surety bond.

Instructions

1. Determine the type of bond you need. A surety bond often is required for construction contracts to ensure the work is completed and the providers of materials are paid. Bail bonds are also a type of surety bond. There are several other professions that require bonding.

2. Decide where to acquire your bond. If it is a legally required surety bond, you may be required to go through a licensed government issuer. Make sure that the surety bond company you choose has a good reputation.

3. Consider becoming permanently bonded if you conduct business that requires bonding on a continual basis. A good company will have rates for yearly or multi yearly contracts and will extend you credit to cover all of your bonding needs.

4. Advertise yourself as a bonded agency to acquire more contracts. Being bonded gives you an edge as people are more likely to trust you if they feel their investment is safe.

5. Make sure you read over your bond contract carefully to ensure you and your buyer are protected. The bond contract should mention the work or sales contract. Have an attorney review the terms for an extra measure of safety and to make sure you understand the terms.

Tips & Warnings

• Having a bond doesn’t mean you have insurance against yourself if you default on a contract. The surety will pay off the contract, but the provider of the surety will come after you for the balance and the lawyer fees.

• Don’t use a bondsman if you are unsure about his or her honesty. You are ultimately responsible and need to make sure you have obeyed the law. Ask for referrals from other people you know who have used a particular bondsman.

Resources

• Read this Article in Spanish