A surety bond is commonly used in the construction industry. Surety bonds are legal agreements between three parties – the contractor, the client and the company issuing the surety bonds. A surety bond, or performance bond, ensures that the work the contractor is hired to do, actually gets done.

A surety bond is issued by an insurance company, so it is a form of insurance coverage. A surety bond company is charged with making sure the contractor will do what their contract with a client says they will do. A premium is paid to the surety bond company to offer this coverage.

Before a contractor is able to get bonded, the surety company will want to make sure the contractor is able to perform the work that the surety bond is guaranteeing. The surety company will do an extensive check of the contractor’s work history and general ability to carry out the work that is being contracted. The surety company may also check into the contractor’s financial history to ensure they are insurable.

You can request free surety bond quotes online from major insurance carriers. This allows you to get an idea of what this coverage will cost you. Make sure that any surety bond coverage you purchase is from a reputable and financially stable company. The surety bond is there to protect both you and your customers, so make sure that the surety company has the financial wherewithal to back the bond.

Depending on your location, you may be required by your state to carry a surety bond. Customers will be much more willing to do business with you if you carry this coverage, so check into seeing how viable a surety bond is for your business.