Surety & Fidelity Bonds

A bond is credit, not insurance — and what that changes

The critical difference between a bond and an insurance policy is who ends up paying. Insurance transfers your risk to the carrier. A surety bond guarantees your performance to a third party — the obligee — and if the surety has to pay a claim, it expects to be reimbursed by you under an indemnity agreement you signed. Sureties do not price for expected losses the way insurers do; they underwrite to a near-zero loss expectation, which is why the process feels more like applying for credit than buying a policy.

That shapes what gets asked for. Contract bonds — bid, performance, and payment — are underwritten on the three Cs: character, capacity, and capital. Expect to provide business financial statements, a work-in-progress schedule, bank references, and personal financial statements and credit from the owners. The output is a single-job limit and an aggregate programme size, which grows as your completed-work history and balance sheet grow. Building that relationship before you need a large bond is the entire game; a surety asked to write its first bond for your biggest-ever job will decline.

License and permit bonds are a different animal: small, statutory amounts required by a state or municipality to hold a licence, usually issued in a day or two off credit alone. Court, probate, and public official bonds fall in the same quick-issue family. If a licensing board has handed you a bond form, send us the form itself — the required amount and wording are set by the statute, and using the wrong form is the usual cause of a rejected filing.

Fidelity and crime coverage is the one product in this group that is genuinely insurance: it pays your business for losses caused by employee theft, forgery, and in some forms computer and funds transfer fraud. Any business where staff handle cash, inventory, client funds, or the accounts payable run has this exposure, and it is one of the few losses that a small business often discovers years after it began. Coverage is usually written per occurrence with a modest deductible, and many client contracts — particularly cleaning, home services, and anything with access to customer property — require it by name.