Surety Bonds
A surety bond is a three-party agreement in which a surety company financially guarantees to a project owner or government agency (the obligee) that a business (the principal) will fulfill a specific obligation, such as completing a contract or complying with a licensing requirement. The Allen Thomas Group helps contractors and licensed businesses secure the bonds that clients, courts, or state licensing boards require before work can legally begin.
How a Surety Bond Differs From Insurance
Insurance pays the insured for its own covered losses. A surety bond instead pays the obligee (the party the principal owes an obligation to) if the principal fails to perform, and the surety then expects the principal to repay whatever it paid out.
| Insurance | Surety Bond | |
|---|---|---|
| Who's protected | The policyholder | The obligee (third party) |
| Who repays a loss | No repayment expected | Principal must reimburse the surety |
Common Types Businesses Need
- License and permit bonds: required by many state and local licensing boards
- Contract and performance bonds: guarantee a construction project gets finished as agreed
- Bid bonds: guarantee a contractor will honor its bid if awarded a project
- Fidelity bonds: protect against employee theft, a related but distinct product from a surety bond
Why This Matters
Without a required bond in place, a contractor generally can't legally take on a job or hold a license in the first place. Bonding underwriting also tends to scrutinize personal credit and financial history more closely than typical insurance underwriting, so it's worth planning for well before a bid deadline.
How The Allen Thomas Group Can Help You
We'll help you understand exactly how surety bonds affects your coverage and cost, then shop your policy across 15+ A-rated carriers to find the right fit.
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