Who Does a Surety Bond Protect?


Who Does a Surety Bond Protect?

A surety bond is a unique type of insurance policy because it does not protect you. The surety bond is purchased by you for the protection of somebody else:

  • Your customers
  • A state agency like a Department of Tax
  • Parties in a legal agreement like a will

Surety bonds are a unique requirement, but they're a necessary piece of a legal agreement.

 

Why Do You Have To Protect a Third Party?

The reason surety bonds exist is to cut down on purposeful fraud. And this is why you have to purchase one.

When you purchase a surety bond you're stating you will follow the laws and not purposefully harm your customers or a third party.

Looking at examples will help.

 

Getting Licensed

When you're getting a Federal, state, or local license, the licensing agency wants to make sure you won't accept customers and then:

  • Steal money
  • Charge false fees
  • Not complete projects

The licensing agency makes you buy a surety bond as the only tool they have to hold you accountable.

Common examples include:

 

Paying Taxes

A lot of businesses collect "additional" taxes above normal sales tax. The most common examples are businesses selling:

  • Alcohol
  • Tobacco
  • Fuel
  • Lottery games

To make sure these businesses collect and pay the correct amount of taxes, the state will require a tax surety bond.

In most cases these surety bonds only are required for a few years and examples include:

Probate Court

In a scenario where an individual is assuming a guardianship role in a minors life, the court may require a surety bond.

This guardianship bond ensures the financial inheritance of the minor is protected until they are 18 years of age.

A Surety Bond Does Not Protect You

Just to recap, a surety bond does not protect you.

You are required by law to purchase a surety bond as your guarantee to faithfully uphold your professional promises.

To put it bluntly, to ensure you won't commit fraud against your customers, a state agency or somebody depending on you.

When you're ready to find your bond, learn how to purchase a surety bond.

 

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You can get pricing for the surety bond you need today. Click the button below. You need to know the amount of your bond.

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