A surety bond is a contract under which one party (the surety) guarantees the performance of certain obligations of a second party (the principal) to a third party (the obligee). Surety bonds are often required by client contracts or local regulations. A surety bond reassures your client they will be reimbursed by an insurance company if your business doesn’t complete a project, breaks the terms of a contract, or fails to adhere to regulations.
The three main categories of surety bonds required in Massachusetts are contractor and construction bonds, license and permit bonds, and court bonds. There are other types of bonds, but these are the ones that are most commonly needed.
Contractor and Construction Bonds
Contractors are generally required to obtain a contractor license bond as part of the process of becoming licensed by the Massachusetts State Board of Building Regulations and Standards. Contractors are also typically required to purchase other types of construction surety bonds in order to bid, win, or work on public works projects.
Required bonds for your project may include bid bonds, performance and payment bonds, supply bonds, and others. In Massachusetts, these bond requirements are established by various municipalities rather than at the state level. The bonds guarantee that the contractor will comply with all applicable rules, regulations, and standards and will fulfill all of their contractual obligations.
License and Permit Bonds
License bonds are required as a condition for obtaining or renewing a license to operate certain kinds of businesses in the state of Massachusetts. They protect state agencies, municipalities and consumers from unethical or unlawful acts of licensed professionals. These bonds are the purchaser’s pledge to operate in a lawful and ethical manner.
Certain bonds are mandated at the state level by the agencies that issue licenses to operate specific types of businesses, such as:
- Home improvement contractors, construction supervisors, and specialty contractors such as electricians and plumbers
- Private occupational schools that train drivers, cosmetologists, or real estate agents and brokers
- Mortgage brokers, lenders, and originators, money transmitters, debt collectors, etc.
- Health clubs, employment agencies, liquor stores, auto repair shops, auctioneers, public warehouses, and more
Massachusetts Court Bonds
Court bonds are typically required as a way to ensure that people appealing cases at any level of the Massachusetts court system pay court-ordered damages, court costs, and legal fees in the event that they lose their appeal. Courts may also require bonds from estate executors, guardians, or conservators to ensure that they fulfill their duties honestly and ethically, in accordance with the law and the rules of the court.
Good for Business
A surety bond not only assures your clients that you business is reliable, but it can also help attract new clients. Even when it’s not required, a surety bond is a way to prove your small business is reliable. It may give you an edge over non-bonded competitors, which could make the difference between winning and losing a project.
At Knight-Dik Insurance, we’ve assembled a team of specialized professionals to help you secure the level of surety credit you need to help make your business a success. Our surety bond team has strong relationships with quality local and national surety companies, allowing us to offer the most appropriate bonding solutions for your business.
Once surety credit is established, you will find most bonds will be issued in less than a day – and almost immediately when a rush is required.
Interested in learning more about surety bonding for your business? At Knight-Dik Insurance, we’ll work with you to identify and implement the most appropriate bonding solutions for your business. For a free analysis of your unique bonding situation, simply contact us here or call 800-286-6353.
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