Commercial bonds, or commercial surety bonds, provide guarantees that businesses or individuals will comply with applicable laws. Governmental entities may require them before issuing a license or permit, and they may be necessary before entities or parties can engage in specific activities or transactions.
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What are Commercial Bonds?
A commercial bond is a type of surety bond. Businesses or individuals may secure them to assure they are complying with relevant regulations. There are three parties to a bond, the principal, obligee and surety. The principal (e.g., your business) purchases and carries the commercial bond; the obligee (e.g., a governmental entity) requires the principal to secure the bond; and the surety (e.g., an insurance company) issues and maintains the bond.
If a bonded principal fails to meet the bond’s requirements, an obligee may file a claim against the bond, and the obligee may receive compensation from the surety up to the bond’s amount. The principal then must reimburse the surety for that expense. This process helps protect public interests by providing financial safeguards.
Commercial Bond Examples
There are many types of commercial bonds, including:
- License and permit bonds
- Tax bonds
- Fiduciary bonds
- Business service bonds
- Miscellaneous bonds
Other types may be available, as well as contract or construction bonds (e.g., bid bonds, performance bonds and maintenance bonds). Contact your agent for details.
Our knowledgeable team can help you secure the commercial bonds that suit your needs. Contact us today to get started.