by Richelle Smith, Manager of Surety Service and Program Development, Main Street America Insurance •
August 1, 2022
Figuring out how to get a surety bond can be confusing and often become an afterthought.
Bonded vs. Insured
What’s the difference between a surety bond and insurance? It’s actually pretty simple:
Surety Bonds:
- Are a three party agreement between the Principal, Surety Company, and Obligee (entity requiring the bond).
- The Principal is obligated to reimburse the Surety Company for a loss.
- Some surety bonds cannot be canceled until the project is complete or a release is obtained.
In contrast, insurance:
- Is a two party agreement between the insured and the insurance carrier.
- Require the Insured to pay the premium, and they receive loss benefits from the policy. No reimbursement by the Insured is requested.
- Can be canceled at any time.
How Long Does it Take to Get a Bond?
Depending on the type of bond you need, the process of obtaining a bond is often faster and simpler than most people think. Some bonds can be issued in just minutes. Other bond types require underwriting and could take anywhere from a couple days to a week to complete, so it’s best to start the process as quickly as possible.
How Do I Know if I Need to Be Bonded?
Here are a few of the most common bond situations you may find yourself in:
- Notary Public Bond: Are you applying to be a Notary to have the ability to notarize documents? Many states require a bond for this.
- Business Services Bond: Is your business one that goes into other people’s homes or businesses to perform a job? You may be required to have this third-party dishonesty bond.
- ERISA Bond: Does your company provide its employees with a pension or 401(k) plan? The IRS will require you also have an ERISA Bond.
- Probate Bond: If you are appointed to act as an administrator, conservator, or guardian of a minor or incapacitated adult, a probate bond may be required by the court.
- License and Permit Bond: Are you a contractor performing a job in a new city? Many cities require various license and permit bonds.
By answering these questions, we can determine what type of bond you need:
- Who is requiring the bond?
- What type of business do you have?
- Have you been provided a required bond form?
While these are just a handful of the common bond types, there are many other requirements that could affect your business. The best way to ensure that you have the proper bond in place is to contact us and we can provide you with any necessary information and begin the underwriting process.