Commercial surety and fidelity bonds for Michigan businesses

What is a commercial bond?

A commercial bond is a written guarantee that a business or person will meet an obligation, such as finishing a contract, following license laws, or handling money honestly. Bonds fall into two broad categories. Surety bonds guarantee your performance to a third party. Fidelity bonds protect against losses caused by dishonest employees. A project owner, government agency, court or benefit plan rule usually tells you which bond is required and for how much.

What is the difference between a surety bond and a fidelity bond?

A surety bond involves three parties: the principal (your business), the obligee (the party requiring the bond) and the surety. If the principal fails to perform as promised within the required period, the obligee is compensated. A fidelity bond protects an employer against employee dishonesty, such as embezzlement, theft, burglary and forgery, whether the loss falls on the employer or on clients who trusted your staff with access to their home or business.

What types of bonds do contractors need?

Contractors are most often asked for performance and payment bonds. A performance bond guarantees the contractor will complete the work under the contract. A payment bond guarantees that bills for labor and materials will be paid according to the contract terms. Union contractors may also need wage and fringe benefit bonds, which guarantee payment of union members’ wages and required contributions to the union’s fringe benefit funds.

Smaller and emerging contractors can sometimes qualify for bonds through the U.S. Small Business Administration’s Surety Bond Guarantee Program. Working with the surety industry, it helps small construction companies obtain bonds on federal, state, local and commercial construction projects and on service and supply contracts and subcontracts.

What other commercial bonds might my business need?

Many bonds are required by a license, a court, a law or a client relationship rather than a construction contract. License and permit bonds guarantee you will follow the laws tied to a license. Court and fiduciary bonds guarantee duties set by a court. ERISA bonds protect benefit plan participants from dishonest handling of plan assets. Public official, notary, business service and crime bonds each cover a specific duty or dishonesty risk.

• License and permit bonds. Required by federal, state and local governments; guarantee compliance with the laws, regulations or ordinances tied to the license or permit.
• Court and fiduciary bonds. Guarantee a person or organization will faithfully perform duties prescribed by law or the courts, or show financial responsibility for another’s benefit until a case is decided.
• ERISA bonds. Required under the federal Employee Retirement Income Security Act of 1974 to protect plan participants and beneficiaries from dishonest acts by the people who handle plan assets.
• Public official bonds. Guarantee faithful performance of a public official’s duties and an honest accounting of public funds.
• Notary bonds. Protect the public from errors, omissions or dishonesty by a notary public.
• Business service bonds. Protect your customers from dishonest acts by your employees while working at their home or business.
• Commercial crime bonds. A blanket fidelity bond on regular employees, and/or a forgery bond covering forged or altered checks, drafts or notes.
• Miscellaneous bonds. Bonds that support private agreements and unique business needs outside the standard categories.

How do I get a bond if I can’t find the type I need?

Start with the document that requires the bond: the contract, license application, court order or plan rule. It names the obligee, the bond amount and often the exact form. We review that requirement with you, confirm which bond satisfies it, and work with our network of surety carriers to place it. Unusual bonds are common, so a bond that is not listed here can usually still be written.

1. Send us the contract, license or court requirement that calls for the bond.
2. We confirm the bond type, amount and any required wording.
3. We gather the underwriting information the surety needs.
4. The bond is issued and delivered to the obligee.