Surety bonds may sound complicated, but they are actually a simple financial tool that can benefit both a contractor and the client that they are serving. In essence, a surety bond is a contract signed by both the business performing the work and the surety bond company that guarantees the clients that the work they are paying for will be completed. The surety bond company basically agrees to find another contractor to complete the job in the event that the original contractor cannot perform their duties. If that isn’t possible, they will ensure payment for the damages or losses that the client incurred.

Paper with Surety Bond on a table

What Do Surety Bonds Cover? 
While there are many different types of surety bonds available based on industry, here are some of the most common situations that surety bonds cover.

  • Bid Bond: Guarantees that the individual or business that bids on a contract will accept the project if chosen, pay any amounts due and obtain a performance bond. 
  • Payment Bond: Guarantees that suppliers and subcontractors will be paid for their work. 
  • Performance Bond: Guarantees that the contract will be completed in the manner and timeframe specified. 
  • Ancillary Bond: Guarantees that other requirements integral to the contract are completed.


What Types of Businesses Need Surety Bonds?  
Surety bonds are typically required when a business or contractor is performing work for any public entity, such as the federal, state or local government. However, many private clients also require a surety bond, especially for high-cost projects. In general, any business or individual who provides a service to a client can benefit from obtaining a surety bond. Some of these industries include auto dealerships, auctioneers, contractors, janitorial services, construction and many others.

How Do Surety Bonds Increase Business? 
While many government entities require bonds, many private clients do as well. This provides a level of security to the client that if something goes wrong on the contractor’s end, they will still get the end results that they are paying for. Thus, having a surety bond for a business gives the owners an advantage over competitors who do not have bonds. This helps them to build up their client base simply by guaranteeing satisfaction and completion of their work.

Is your business covered? Call A-Best Insurance at 713-681-1967 for more information on Houston surety bonds.

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