Your Total Insurance Solution

Contact Us | 304-263-3361

Erie insurance Policy Holders



Posted by / Filed in: Business Insurance

Financial Surety Through Bonds

Having insurance to protect your various material assets—home, vehicle, business, etc.—is just smart, and sometimes it’s required. However, we very rarely think about insurance we may need for being protected on a financial level. Unfortunately, many don’t know about the value of surety bonds.

Think of a surety bond as a promise to a third party. Ultimately, the insurance company is guaranteeing protection of any financial harm someone else receives due to your actions. It is the undoing and correcting of your mistake. For example, if you’re a contractor hired to do some roofing work, but you don’t complete the work, a surety bond provides for a replacement contractor or client compensation in the event of default.

Beyond the value, surety bonds are increasingly required by states and municipalities. Simply put, surety bonds protect your client. Many times you, as a contractor, won’t even get the job without a bond. Typically states and municipalities won’t let you perform your work without the surety bond.

However, bonds for contractors aren’t the only types available. Here are just a few examples of the different kinds of surety bonds and what they do.

Contract Bonds

As demonstrated in the previous example, contract bonds help guard against financial loss if a bonded contractor fails to fulfill the terms and conditions of a given contract.

However, this type of bond doesn’t just apply to roofing contractors. Contract bonds can help protect against project bid defaults, payment on uncompleted work, and work not done to specifications of your bid—which would result in financial harm to the third party.

Let’s take for example that you own a commercial building and you need a new roof. You award the work to a bid from XYZ Roofing Company. But instead of a $400,000 roof, they install a $200,000 roof. The work wasn’t completed to the quality and standards you paid for.

This is where a contract/performance bond will come into play. Instead of just eating that cost and having to pay another company, the contract bond will ensure the work will get done correctly—whether through the current contractor or a new one.

Executor Bonds

 Let’s pretend for a moment that your great aunt, Susie, has just passed away, and you were appointed executor of her estate. While Aunt Susie’s estate is being settled, you decide to cash in and misappropriate her assets. Now all is lost.

Not so fast; thankfully the court required an executor bond. Not only do executor bonds require accountability, it assures that nothing is misappropriated. While the bond can’t replace valuable family heirlooms, it can ensure that the assets left to her beloved family members are recovered and distributed appropriately.

Car Dealership Bonds

You just got your first real job after college and can finally replace the car you’ve been driving since high school. You’re at the dealership and purchase a brand new sports car—the vehicle of your dreams!

A few months later you come to find out that the dealership may have collected your money, but they forgot to pay out taxes, title, and registration fees. The good news here is that there is a surety bond to cover that situation.

A car dealership bond goes into play when a state isn’t given money they are due. It allows them to file a claim against the surety company—who then goes to the dealership for the money—instead of coming after you!

Notary Bonds

The final type of surety bond you are likely to run across is a notary bond. This is a type of public official bond that is required by states or other governments—other than the federal government. This bond will guarantee that a notary will faithfully and honestly perform their duties.

Notaries are valuable members of society who verify and validate various forms of documentation, making them binding and official.

Having a notary bond in place will ensure that in the event of a falsified signature or unfulfilled duty, the injured party can be reimbursed if the notarized document is found invalid. Due to their amount of authority over legally-binding documents, the notary should have protection in place through this bond. This bond will protect you against errors a notary might make, including binding fraudulent signatures and other unethical practices.


When looking for contractors, dealerships, or notaries, ask if they are bonded. Not only will a surety bond protect you from any financial damages, but it helps protect the owner from financial ruin as well. Whether you own a business or are utilizing services, surety bonds are a valuable resource to protect your assets!

If you have questions about surety bonds, or if you would like to review your insurance needs, contact Smallwood & Small today! Call 304-263-3361 to talk to an agent at our Martinsburg office or 304-229-7227 to reach our Inwood office. You can also visit our website for a quick quote.


CC BY-SA 3.0 Nick Youngson / Alpha Stock Images

« Return Blog

Leave a Reply

  • (will not be published)

Facebook Twitter LinkedIn Yelp