What is an insurance bond and how do you get one?

Question

If I have a service business and am looking for a bond how do I get approved for an insurance bond?

Answer 1

You need to go to a local, independent agent, who can get you started on the bond underwriting process.

There are literally dozens of kinds of bonds - anywhere from a notary bond, to a public official bond, then with contractors it's payment, performance and bid bonds. All these bonds do different things, taylored for a specific need or bonding requirement.

Basically, a bond is a three way contract. The three parties are you, the "bonded" party; the obligee, the party you give the bond to; and the obligor, the insurance company. As an easy example, say you are required to have a performance bond, for Joe's Pizza, in order to guarantee Joe that you'll get the job done. The job cost is $5,000. The bond is a guarantee, FROM the insurance company, that YOU will do XYZ, by XYZ date, and if you DON'T, then they pay Joe's Pizza the $5,000.

A notary bond, is a guaranty from the insurance company, TO THE STATE OF RESIDENCE, that the notary named, will follow the notary laws, and if they don't, then the insurance company pays the state $1,000.

A sales tax bond (auto dealers have them), is a guarantee, TO THE STATE, that the auto dealer will remit all sales tax collected from clients to the state, or the insurance company will pay the state $25,000.

A bid bond, however, is a guarantee to the owner (the job owner), that you not only can/will do the job for the bid price, but ALSO can then obtain the payment and performance bond, if you get the job. Or, of course, the insurance company pays the job owner 5% of your bid.

A local agent can get you lined up, if you have your heart set on a bond - but allow up to a month for underwriting, and be prepared to personally guarantee the bond if your business is new.

Answer 2

As stated there are thousands of types of "insurance bonds". There is no specific bond for a service business; but, Should you wish to indicate to customers that you are bonded for theft, you can attain a fidelity bond easily for little cost and no credit or asset/worth considerations.

These bonds are readily available on the internet and can be acquired in just a few days.

If your type of business requires license bonding, then the type and amount would determine how easy or difficult it would be to attain. You should try to work with a surety agent, if possible. They could help keep the cost and time down in getting bonded.

You can check out http://www.southcoastsurety.com/ for more generic information on surety bonds.

Answer 3

An insurance bond is secured through cash and or assets.Bonding agents are very numerous,I would suggest you talk with someone with similar service business in your area. Good luck