Surety in action
A surety bond comes into play when the principal defaults on their contract.
If your construction company fails to fulfill your part of the agreed-upon contract, the surety would step in to reimburse your client for any outstanding expenses related to the project. This could happen in the bidding phase or after you’ve won the contract and started work. In this way, the surety bond protects the client against financial loss.
It’s important to remember that surety isn’t insurance: it behaves more like a credit instrument for your business and protection for your client. In fact, surety and business insurance are both key risk management tools, protecting your company and your clients from financial and legal trouble.