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Surety Bonds

Bond coverage for any project or specialty:
fidelity bonds, janitorial bonds, licensing bonds, performance bonds, and more

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Contractor surety bonds

What Are Surety Bonds?

A surety bond is a financial contract between three parties: the obligee (the buyer), the principal (the client), and the surety (the financial backer). This bond guarantees that the surety will reimburse the principal if the obligee fails to complete agreed-upon work, including delivering the job on time. The surety bond allows contractors and clients to reduce the risk that something might go wrong and ruin their future finances.

Surety Bond Quotes From Many Reputable Carriers

Everything You Need To Know About Surety Bonds


Do you need a surety bond?

Surety bonds are most often used to comply with contractual requirements or local operational regulations. It guarantees that if work is not completed, does not meet quality standards, breaks contract terms, or does not follow legal regulations, the client can receive financial reimbursement from the surety-backing organization.

Businesses that purchase surety bonds appear professional and reliable. If your company is looking for a way to increase request for proposal (RFP) and contract win rates, a surety bond might help you accomplish that goal.

What are the different types of surety bonds?

There are multiple forms of surety bonds, some of which apply to specific industries.

  • Fidelity bonds – Financial institutions that handle customer’s money may need a fidelity bond that covers principal investments.
  • Contractor bonds – Many contractor businesses are required to be bonded before starting work on a client’s property in case damage is caused while performing their work.
  • Auto dealer bonds – Some states require an auto dealership to purchase a bond before they begin selling cars.
  • License & permit bonds – Many professions require a licensing bond before opening a business. This varies by state of operation. Some examples include notaries, taxis, realtors, and insurance brokers.
  • Janitorial bonds – This covers cleaning and sanitation companies when an employee accidentally breaks a client’s property or steals from a client.
  • Performance bonds – When a business does not fulfill its contractual obligations, a performance bond may compensate the client for the failure to complete the contract.

What does a surety bond cover?

Surety bonds provide assurance that your customer will be compensated should something go wrong during your company’s contractual work. This can include incomplete contractual agreements, failure to meet contractual criteria, and failure to meet legal regulations. It can also cover your business if there are bond requirements to hold an industry license or if your employee steals from a client.

Incomplete contractual agreements

If your company does not fulfill the work promised within a contract, your customer can recoup their damages from the surety (the financial backer). They can recover damages up to the bond’s insured amount. This helps customers know they will be compensated if your business does not complete the contracted work.

Failure to meet contractual criteria

Each contract has a different set of important benchmarks that need to be accomplished during the course of the project. These criteria can range widely: work-based features, completion within a certain timeframe, or other contractual obligations. If your company does not follow the contractual agreements, then your customer can seek reimbursement from the surety bond provider.

Failure to meet legal regulations

If there are federal, state, or municipal guidelines that are not followed during the contracted work, there is a possibility that the entire project may need to be completely redone. If your company misses legal requirements, a surety bond can help your customer recoup damages.

Bonded licensing or permit prerequisites

Each state has different requirements for industry licensing and permitting bonds. If you want to start a business, be sure to review federal and state guidelines around which bonds are required before you start working with customers. In many states, real estate agents, financial institutions, taxis, notaries, and more need a special type of bond before opening their doors.

Employee theft

Some bonds will cover your company if one of your employees steals from a customer. Typically, if you require coverage against customer property damage, you will need to purchase a general liability insurance policy.

What does a surety bond NOT cover?

Each surety bond is different depending on your industry and desired coverage. However, most bonds will not cover damage to customer property, job errors or omissions, or injuries that occur during the contracted work.

Property damage

A surety bond will not cover property damage. If there is damage to a customer’s property, then you will need to submit a claim through your company’s general liability insurance policy. Damage to your business’s equipment or tools during a project would require either inland marine insurance or commercial property insurance depending on how and when they are broken.

Errors & omissions

Errors and omissions during the course of a contract will not be covered by a surety bond. If you or your employees make a mistake, you will require a professional liability insurance policy for coverage.


Injuries to third parties are covered under general liability insurance and employee injuries will require a workers’ compensation insurance policy for coverage.


How much does a surety bond cost?

The major contributor to a surety bond’s cost is the amount of coverage the bond provides. If your surety bond needs to cover higher coverage limits, the monthly premium will be higher as well. Some other factors that may affect surety bond cost are:

  • Industry – Professions with greater risk will often pay more.
  • Company credit rating – Better credit ratings will often result in more affordable bond prices.
  • Government regulations – If there are certain government requirements that need to be met, they could influence the bond cost.
  • Financial stability – A company's track record for financial solvency may help secure better bond rates.

Speak with one of our licensed insurance agents to get an accurate surety bond quote >


How are surety bonds different from an insurance policy?

The most common insurance policies provide coverage to the policyholder based on a claim made by the policyholder, while a surety bond provides coverage to the client.

For example, a paving company signs a contract with the state government to develop a new road, and the contract requires the paving company to be bonded with a surety bond. The state can request repayment through the surety if the contractor doesn’t complete the project to the required legal specifications.

When is a surety bond purchased?

Most surety bonds are purchased before the onset of a job. They are bought because a client contract specifies the need for a company to be bonded before performing contracted work or government regulations dictate a bond.

Does the principal approve the bond purchase?

Yes, usually the principal (client) would need to approve the purchase after reviewing the agreed-upon bond terms arranged by the surety provider.

Is the cost of the bond factored into the cost of the contract?

That depends on what the obligee and principal decide during contract negotiations. Most obligees will include the bond price into their quote before submitting it.

Should the bond criteria be included in the contractual agreement?

Yes. Bond criteria should be part of the contractual agreement between the parties.

How do I make a surety bond claim?

Most carriers have online claim reporting capabilities, or you can call their toll-free claims reporting phone number. At Winooski Insurance Agency, we are available to provide information about the claim reporting process. Our clients can rest easy knowing our experienced agents are ready to help when needed.

View a list of our partner carriers and instructions on where to file a claim with each.

Why should I get a surety bond through an independent agency?

Winooski Insurance has been an independent insurance agency for almost 40-years. During this time, we have created long-term relationships with a multitude of insurance partners which allows us to present you with a broad range of coverage options at competitive rates. We’re committed to helping you address your unique requirements.

What Other Types Of Insurance Should Your Business Consider?

General Liability Insurance

Protect your business from common third-party injuries, damages, and risks.
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Commercial Property Insurance

Protect your company's property and inventory from damage or destruction.
Learn More

Commercial Auto Insurance

Safeguard your business-owned and operated vehicles from accidents and lawsuits.
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What Our Customers Are Saying

The level of service and professionalism I’ve received from Jeff and the experienced professionals at Winooski Insurance is unparalleled. I’m grateful to have been referred to Winooski Insurance and truly feel like I have a business partner, not just an insurance company.

Cherian Philip, CFO
Aspenti Health

Cherian Philip, CFO

The entire team at Winooski Insurance have done an outstanding job of providing insurance coverage for my company. This is not always easy, as each project has to be reviewed by Winooski Insurance to verify that we have the required coverages.

David Bogue, President
Professional Construction Inc.

David Bogue, President

I have personally and professionally used Winooski Insurance for over 15 years. The staff is efficient, the service is excellent, and they work hard to keep the premiums low. I highly recommend Winooski Insurance!

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Draper and Kramer Mortgage Corp.

Mark Chaffee, Senior Loan Officer