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Surety Bonds

A surety bond from Selective can help boost customer confidence in your services and protect your company’s reputation.

Close-up view of an agent discussing the benefits of a surety bond with a business insurance customer.

Surety bonds guarantee certain contractual obligations, such as project performance, deadlines, and payment, between two parties within a set period.

When paired with business insurance, surety bonds can help set your business up for success.

Types of surety bonds we provide include:

Contract Surety Bonds
Commercial Surety Bonds

WHY SURETY BONDS ARE GOOD FOR BUSINESSES

A contract performance surety bond can help clients feel more confident about doing business with you, because the bond backs your performance. It acts as a type of protection for the project owner, providing recourse if you or a subcontractor you hire fails to complete the project. A payment surety bond also protects you, should the project owner not meet their payment obligations.

Commercial surety bonds are often required by state statutes and local laws. Surety bonds come in two categories:

Contract Surety Bonds

With few exceptions, public construction projects on the federal, state, or local level require the contractor to provide a bond. The ability to obtain surety bonding is the lifeblood of a construction company, and Selective serves all types of contractors and specialty trades, as well as service providers, manufacturers, wholesalers, and distributors in providing:

Performance Bonds – Guarantees that a contractor will perform in accordance with the terms and conditions of the contract. However, defective materials and workmanship are typically only covered for a 12 month period (or, rarely, for 24 months).
Payment Bonds – Guarantees that a contractor will pay its subcontractors and materials suppliers.
Bid Bonds – Assures that a bid for a contract has been submitted in good faith and that a contractor will enter a contract at the price bid and provide required performance and payment bonds.
Site Improvement Bonds – Guarantees the completion of public improvements in accordance with governmental ordinances when required in conjunction with the construction of or improvements to a commercial building.

Commercial Surety Bonds are required to meet a myriad of commercial obligations, ranging from simple, low-risk bonds required to guarantee compliance with a license to more complex, high-risk financial guarantees, including:

License & Permit Bonds – Typically low bond penalty amounts – required by governmental entities in connection with a license or permit to operate a business.
Public Official Bonds – Required by local or state statutes that set the bond amount – commonly required for Treasurers, Tax Collectors, Municipal Clerks and School Administrators.
Judicial/Fiduciary (Court) Bonds – Required when an individual must act in the capacity of another person – commonly required for an executor or administrator of an estate, guardian of a minor or incompetent and court appointed trustees.
Miscellaneous Bonds – Required by governmental entities, utility companies or labor unions to guarantee the payment of money, indemnity obligations or performance of an obligation.

DOES MY BUSINESS NEED A COMMERCIAL SURETY BOND?

Many states require that a business obtain one or more commercial bonds before issuing a license or permit to conduct business operations. Large customers, especially government agencies, require them because they protect their investment in your business. Typical companies that can benefit from bonding include:

General Contractors
Plumbers
Electricians
Construction Companies
Driving Schools
Auto Dealerships
Alcohol Manufacturers, Distributors, and Sellers
Restaurants
Notary Publics
Professional Offices
Private Schools

Unsure if your business would benefit from a surety bond? Talk to an independent agent who can help you understand if a surety bond is right for you.

MANAGE YOUR BUSINESS RISKS WITH RISK MANAGEMENT SERVICES

Selective’s Risk Management team offers firsthand guidance and complimentary digital resources to help policyholders keep their operations running smoothly year-round.

Click here to Learn More about MANAGE YOUR BUSINESS RISKS WITH RISK MANAGEMENT SERVICES

FREQUENTLY ASKED QUESTIONS ABOUT SURETY BONDS

How much do surety bonds cost?

Every project contract is unique, and the cost of bonding can vary greatly. Some factors that can impact cost include your industry, credit score, project location and scope, timeline, materials required, subcontractor work, and more. An independent insurance agent can help you review your contractual obligations and determine if a surety bond is right for you.

For more information on the types of business insurance solutions Selective Insurance offers, visit Insurance Coverages for Your Business.