Understanding and getting commercial surety bond
Types of Surety Bonds
There are various types of bond, some of the commonly used Commercial Surety includes
- Court Bonds, in the form of
- Judicial; or
- Bond for Customs & Excise
- Bonds required for License & Permit
- Bonds for missing Documents (commonly known as "loss")
- Construction bonds which may be in the following form
- Bid bonds
- Performance bonds
- Payment bonds
A bond's purpose is to satisfy the security requirements of public, legal, government or private entities to protect against financial risk. These bonds guarantee that the business or individual will comply with all required legal obligations.
How commercial surety bonds are generally used
Most commercial surety bonds are used to satisfy federal and provincial courts' security requirements, government bodies, financial institutions, and private corporations. They guarantee that the business or individual will comply with all required legal obligations.
Commercial surety bonds are generally protected against compensation of monetary loss, fraud, and misrepresentation.
Commercial surety bonds can be used to assure the performance of non-construction related contractual obligations. For example, companies that supply and install equipment. An organization may require a bond, so the supplier will install the equipment as well as service it.
Industry Licensing Requirements
In Canada, surety bonds may only be issued by companies licensed to do so, either federally or by one of the provincial insurance regulatory bodies. The requirements to obtain these licenses are very high, and applicants are required to demonstrate financial solvency and sufficient strength to meet potential claims obligations. Only firms licensed to sell surety bonds in Canada may become members of the Surety Association of Canada.