Of all the insurance-related products available on the market today, surety bonds can be among the most difficult to understand.

A surety bond is essentially a contract where one party guarantees the performance of another party. The guaranteeing party is usually the issuer of the bond, and the party whose performance is being covered is the person who invests in the surety bond.

The more you know about these unique and complex products, the better prepared you will be to utilize a surety bond to your benefit in the future.

Who Needs a Surety Bond?

Anyone can secure a surety bond, but there are specific individuals that are mandated by government regulations to maintain an active surety bond.

Most of the industries that are legally required to carry a surety bond provide a service to the public. The bond acts as a protective preventative measure to preserve consumer interests.

Common businesses that are required to maintain a surety bond include construction contractors, roofers, collection specialists, and motor vehicle dealerships.

It's important that you check with both your state and municipal governments when trying to determine if you need a surety bond, as both governments can have their own regulations regarding surety bonds.

 Where are Surety Bonds Obtained?

Once you determine that you need a surety bond, you will need to figure out where you can secure a bond that meets government regulations.

The only place to obtain the right surety bond is a surety agency that has been licensed and approved by your state. These agencies are required to be familiar with the surety bond requirements and minimum coverage amounts required of each applicable agency.

Partnering with an experienced surety agency can help ensure that the surety bond you acquire meets all government rules and regulations to prevent potential legal problems in the future.

How Much Will a Surety Bond Cost?

The cost of a surety bond can vary from one surety agency to the next.

You will be required to secure a bond for a minimum amount, depending on the industry in which you plan to operate. Surety agencies charge a percentage of this total bond amount to underwrite, prepare, and execute the bond itself.

Many governments set a maximum on the percentage a surety agency can charge, but there is no minimum. Most people choose to pay the premium up front, but you may be able to work out a financing arrangement with the surety agency to pay the premium via monthly installments.

For more information about surety bond insurance, contact a local professional.