Surety Bonds for Small Businesses: Tailoring Coverage to Your Needs

surety bonds

Every business faces a risk of unexpected challenges and complications. Surety bonds provide protection in the face of uncertainty. A surety bond is an agreement between three parties in which one party provides a guarantee that another will meet their contractual obligations. The more you know about these bonds and their features, the easier it is to appreciate their importance.

Property and Casualty Coverage for Physical Damage

The principal on a surety bond is the individual or business purchasing that bond to guarantee their responsibility under the terms of a contract. The obligee is the party requiring the bond, or the other party in the contractual agreement. The surety is the insurance company underwriting that bond.

Choosing the right bond starts with understanding the purpose of each. For example, license and permit bonds ensure that businesses comply with licensing requirements and regulations. Many local and state governments require these bonds with contractual agreements.

Contract bonds, frequently used in the construction industry, guarantee project completion, subcontractor payments, and contractual compliance. Fidelity bonds protect businesses against employee theft and dishonesty. Service-based companies often rely on these bonds.

What Types of Small Businesses Need Surety Bonds?

A surety bond helps businesses of all kinds in many different industries.

Construction and Contractors

Construction and contracting professionals, including residential builders and major construction firms, rely on contract bonds when securing projects.

Service Providers

Many service providers rely on license and permit bonds for legal compliance. Janitorial services, landscaping, and cleaning services are a few of the industries benefiting from these bonds.

Transportation and Logistics

Freight brokers and carriers traditionally carry bonds to ensure compliance with industry regulations and requirements.

Retailers and Suppliers

Businesses selling regulated products, including alcohol, tobacco, and firearms, may need bonds for federal and state regulatory compliance.

Professional Services

Many professional service providers, including real estate agents, mortgage brokers, investment advisors, and insurance agencies, benefit from surety bonds to build trust and show commitment.


Healthcare agencies and medical supply providers may need bonds in order to participate in federal programs such as Medicaid and Medicare.

Manufacturers and Distributors

Businesses in manufacturing and distribution may need bonds to secure contracts and establish partnerships.

Government Contractors

Businesses bidding on government contracts may need contract bonds to support their ability to fulfill contract terms.

Tailoring Surety Bond Coverage

Small businesses can tailor bond coverage to meet their specific needs. The value of the bond should meet the requirements established by the obligee. This value varies depending on the project scope and industry. Businesses can also adapt their bond based on the duration of the project and the coverage limits needed for adequate protection.

Renewal options and needs vary based on the type of bond and the nature of the project. Some bonds are single-term, while others need renewal options for extended coverage. Bundling allows businesses to combine multiple types of bonds for comprehensive coverage, which can lead to cost savings while simplifying bond and contract management.

Surety bonds play an important role in the success of many small businesses. The Construction Practice Group at The Hilb Group can help businesses with their surety bond needs. Their strong relationships with underwriters, financial institutions, and law firms facilitate the partnerships needed for businesses to thrive with the bonds that they need.

About The Hilb Group

Deciding what coverage you need and what limits and deductibles make the most sense can be tricky. Founded in 2009, the Hilb Group has been helping clients make sense of their options and make the smartest choices for their circumstances. Whether you need warehouse insurance or any other type of business or personal coverage, we encourage you to contact our friendly, experienced, and capable team today. Call us at (800) 776-3078 for a consultation.