Are you looking to learn more about surety bonds? Surety bonds are more than just a written guarantee — they are actually a form of protection from fraud.
A surety bond always involves three parties:
- The Obligee. This party is paid the bond in case the principal party defaults on their obligation.
- The Principal. The party whose obligation is guaranteed.
- The Surety. This party will assume the obligation if the principal party can’t.
The primary purpose of a surety bond is to protect the obligee against losses that occur because the principal failed to perform its obligation or undertaking.
These are some of the most common reasons to get surety bonds in Canada:
- To fulfill a business license requirement
- To fulfill a permit requirement
- To help build a customer base
- You’ll be entering into a contract
- You need protection if you’re going to court
- You want to protect your business
We’ll also talk about two of the most common kinds of surety bonds. When you’re ready to purchase surety bonds, we’re here for you at Bow Valley Insurance.
1. Surety bonds can help you fulfill a business license requirement.
Depending on the type of business license you are applying for in Canada, you, your company, or your organization may be required to be bonded – that is, to have a surety bond.
A surety bond license requirement is important to help ensure that Canadian consumers are protected against fraud. Surety bonds don’t just help protect your potential customers – it also helps protect you in case any of your employees engage in fraudulent behaviour.
2. Surety bonds can help you fulfil a permit requirement.
Requiring permits is very common in the construction industry. Permits are important to ensure that building codes are correctly followed, regardless of whether an existing building is being modified or a new building is being constructed.
Depending on the type of commercial construction being undertaken, a government permit may be required. In this case, the Canadian government will require a surety bond before the project can even be started. This helps guarantee the contractor will comply with all applicable Canadian regulations and laws.
3. Surety bonds can help you build a customer base.
When people are looking for a contractor, they are always looking for the keywords “licensed” and “bonded.” These two keywords indicate to potential customers that your company has:
- Fulfilled any requirements necessary to comply either with the law or a regulatory body.
- Taken the time to ensure that the company or the customer will be able to be compensated in case of an unexpected event or issue with the company’s work.
A surety bond is a great way to help convince potential clients that you are trustworthy.
4. Surety bonds can help you if you’re entering a contract.
If you’re looking for work for your company, then the first place you’ll start is placing bids for projects. If your bid gets accepted, then you’ll need to enter a contract, and that contract will likely require a surety bond. You may need a surety bond to even make a bid in the first place.
There are several different types of surety bonds, including payment bonds, bid bonds and performance bonds.
5. Surety bonds can help you if you have to go to court.
No matter how good a job you do, there’s always the chance that an unhappy client can sue you. You may need a particular type of surety bond called a court bond if that happens.
There are different types of court bonds, with one of the most common ones being a cost bond. A cost bond guarantees your company will be capable of paying all its court expenses – from attorney fees to copy fees.
6. Surety bonds can help if you want to protect your business.
Another way surety bonds can help you is by providing your business with extra protection via different types of surety bonds, such as a fidelity bond. A fidelity bond can help with the fallout caused by theft, embezzlement and fraud.
By being proactive and getting the right kind of surety bond, you can help ensure a corrupt employee doesn’t bankrupt your company.
What is a commercial surety bond?
Commercial surety bonds must satisfy the security requirements of various parties, including federal and provincial courts, financial institutions and private corporations. A Commercial surety bond helps guarantee that a business or individual will comply with all of their legal obligations.
These are some of the most common types of commercial surety bonds:
- Court bonds
- Customs and excise bonds
- License and permit bonds
- Lost documents bond
What is a contract surety bond?
Contract surety bonds are primarily used in the construction industry. The purpose of a contract surety bond is to protect the owner or obligee from financial loss if the contractor or principal does not fulfill the terms of their contract.
These are some of the most common types of contract surety bonds that are used in the construction industry:
- Bid bonds
- Performance bonds
- Labour and Material Payment bonds
- Prequalification Letter
- Consent of Surety/Agreement to bond
What is the difference between a bond vs. Insurance?
While both are deisgned to protect the individual or company incase something goes awry, being bonded is not the same as being insured.
Simply put, a bond is more similar to a credit that will protect and repay the principal party incase there are any issues. It’s like an added level of insurance. With insurance, the party must pay a premium to compensate in the event of a loss (damage, illness, death, etc.).
Why should I choose Bow Valley Insurance for surety bonds?
At Bow Valley Insurance, we’ve been serving Canadians for over 40 years. We offer a wide variety of personal and commercial insurance, including surety bond insurance.
No matter what situation you need a surety bond for – whether to tender a bid or fulfill other employment, legal or financial requirements – we’re here to help you. Our highly qualified agents can discuss with you the many different kinds of surety bonds we offer, including:
- Administration or Fiduciary bonds
- Bid bonds
- Contract bonds
- Fidelity bonds
- Labour & Material Payment bonds
- License & Miscellaneous Surety bonds
- Lost Securities bonds
- Named Scheduled Fidelity bonds
- Performance bonds
- Service bonds
- Surety bonds
Don’t miss out on an opportunity because you don’t have surety bonds – let us help you!
Contact Us About Surety Bonds
To learn more about surety bonds, call Bow Valley Insurance at 587-855-4260 or contact us here.