• Collection agencies
• Construction companies
• License / permit requirements coverage
• Failure to meet standards or regulations coverage
Surety bonds are often offered by insurance companies, but they’re more similar to a line of credit than an actual insurance policy. A bond gives a business a line of credit that they can use to compensate a customer or client if a product doesn’t meet minimum requirements or a project can’t be completed on time. Instead of keeping thousands of dollars in savings just in case, businesses can pay a premium for a bond and have access to funds should they need to compensate a customer or client.
This type of bond is an agreement between three parties:
1. The issuer of the bond, which supplies the line of credit
2. The obligee, which is the company providing the product or service
3. The principal, which is the organization that will receive the funds if there’s an issue with the product or project
The principal may be a direct customer or client, or it might be the State of Vermont. State licenses for certain kinds of businesses require a business to maintain a bond, line of credit, or minimum level of savings. A bond is usually the best option for these businesses. If there is a problem with a product or service, the bonds funds are given to the state, which then disburses them to the appropriate person or organization.
Many businesses need to have a surety bond. In some cases, they’re required by law (or they’re one of a few options). In other situations, they aren’t legally required -- but getting clients without one will be difficult. A few types of businesses that often purchase a bond include:
- Automotive dealerships
- Collection agencies
- Construction companies
- Health clubs
- Medical equipment providers
- Travel agencies
Even some professionals either have to or should strongly consider a bond. Auctioneers, public notaries, and independent contractors, depending on the nature of their work, might need one as well.
There are several types of surety bonds. Some common kinds include:
- License and Permit Bonds, which are may be required by the state and typically name the state as the obligee
- Public Official Bonds, which guarantee that a public official will perform their duties faithfully
- Probate and Other Types of Court Bonds, which guarantee that fiduciaries and trustees will perform their duties faithfully
- Contract Performance Bonds, which guarantee contracted work
- Others, such as Utility Payment Guarantees, and Union Wage and Welfare Bonds
Businesses from Brattleboro, VT to Burlington, VT may get a surety bond from a knowledgeable, independent business insurance agent who is licensed in Vermont. Businesses in the state’s larger cities, such as Montpelier, VT and Barre, VT, may be able to go to a local office and get one. Businesses in rural parts of the state might have to contact a commercial insurance agent in a different town or city, but the necessary paperwork can usually be completed without traveling to an office.
When making a large purchase or beginning a big project, people and organizations often want a guarantee that the product will be as expected or the project will be completed on time. A company guarantee is sufficient for smaller purchases and projects, but major ones sometimes require more assurance. Surety bonds give Vermont businesses a way to provide large financial guarantees to their customers and clients who make large purchases and accept bids for major projects. Many businesses in the state, including auto dealers, contractors, health clubs and other companies, have a surety bond.