What is a Surety Bond?
When beginning a large project or making a big purchase, organizations and people frequently want a guarantee that the project will be completed or purchase will be as expected. While a company’s guarantee or warranty may be sufficient for small projects and purchases, major financial investments sometimes require larger assurances. Surety bonds give Massachusetts businesses that bid on large projects or sell big-ticket items a way to provide their clients and customers with substantial financial guarantees. Many different businesses in the state, such as health clubs, contractors, and auto dealers, might use a surety bond.
Surety bonds are typically sold by insurance providers, but the bonds are more akin to lines of credit than true insurance policies. They’re essentially lines of credit that are specifically used to compensate clients and customers if a project or product doesn’t meet minimum requirements.
By getting a surety bond, businesses that work on major projects and sell big-ticket items don’t have to keep thousands (or tens of thousands) of dollars in the bank in case something goes wrong. Instead, they can pay a nominal premium and have a bond available in case they need it.