What is a miscellaneous commercial bond?
Commercial bonds are similar in many ways to insurance policies, but they cover situations that general commercial insurance policies do not. They can assure that a person or company will perform its obligations. If they fail, the company that issued the bond (called the “surety”) may cover the damages.
Miscellaneous commercial bonds don’t fit neatly into any general bond category (court and probate, construction, and license and permit). Instead, they represent a vast and diverse range of surety obligations that aren’t easy to classify. Often simply called “commercial bonds,” they can support both private enterprise and public government needs, many of which are unique.
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How do miscellaneous bonds work?
An individual or company, called the principal, pays a premium amount – usually a percentage of the overall bond amount. Bonds are often active for 12 months before they must be renewed.
The person or entity that requires the bond is called the obligee – whom the bond protects. If an obligee files a claim on the bond, the surety investigates the allegations. If the surety determines the claim is valid, they may pay for the obligee’s damages (up to the total bond amount) or arrange for the principal to do so.
The surety will then recover payment from the principal in addition to penalty charges (either a set penalty fee or a portion of the paid sum). The principal will also be required to pay any claims over the bond total.
Private investigators may be required to post a bond to assure the public that they’ll deal with them honestly and professionally. The bond also ensures they cooperate with criminal justice authorities.
Requests or requires the bond
Purchases the bond
Issues and guarantees the bond
Why would someone need a miscellaneous commercial bond?
The federal government, states, cities, counties, and other local government entities require commercial surety bonds for various businesses and trades. Many companies or contractors may not operate or conduct business legally without being bonded in accordance with the laws of their jurisdiction. This protects the public from companies that break the law or fail to live up to the terms of their legal contracts.
In addition to being required by law, commercial bonding may protect a business’s prospective clients from loss. This extra peace of mind can be valuable to customers and help reassure clients who otherwise may feel uncomfortable engaging your services.
Businesses that work inside clients’ homes, for example, often advertise their bonding to reassure prospective clients that their homes and possessions are protected against loss or damage.
Miscellaneous Surety Bond Requirements
Statutes and regulations dictate bonding requirements for many industries and specify the required amount of those bonds. Examine the local requirements for your industry, and make sure that your surety company can issue bonds that meet those requirements.
As part of the approval process, a surety provider may request your financial information (and that of your business partners) and perform credit and background checks. Underwriters will calculate your bond premium based on your credit risk and other factors – like the nature of your industry. Once you’ve paid the premium, the bond will be active until its term expires.
ZipBonds provides thousands of bond options, including miscellaneous commercial bonds.
Types of Miscellaneous Commercial Bonds
Many industries require workers or companies to have a commercial bond. Often, these are fidelity bonds – protecting against employee misconduct like fraud, theft, and embezzlement. In other situations, bonds ensure that a business pays all appropriate federal, state, and local taxes and follows applicable regulations.
Common types of miscellaneous commercial bonds include:
Business Service Bonds
For businesses with workers in clients’ homes to protect clients from theft
Employee theft bonds
Protect a business against internal theft
Protect the state in case a lottery seller mishandles funds, doesn’t pay taxes, or tampers with equipment
lost title bonds
Ensure clean titles for vehicles and other property
mortgage broker bonds
Often required before gaining a mortgage broker license
public official bonds
Ensure public officials handle public funds properly
real estate broker bonds
Guarantee that funds or properties turned over to brokers or agents are appropriately handled and accounted for
tax collector bonds
Ensure officials perform tax duties ethically and legally
Protect retirement plans from loss that may occur because of fraud or embezzlement
janitorial service bonds
Protect clients against employee theft or misconduct
How much does a miscellaneous bond cost?
Bond premiums, typically paid yearly, are a percentage of the bond total. This percentage may vary greatly depending on your credit risk. If no one files a claim on your bond while it’s active, your only cost should be the premium.
Some commercial bonds can be written without a credit check. For bonds that require a credit review, the premium varies depending on your creditworthiness and personal and professional qualifications. The premiums may be 1-3% of the bond amount for applicants with excellent credit ratings. Those less qualified may be approved at a higher premium rate (up to 15%).
Frequently Asked Questions
Any approved surety agency licensed in your state (like ZipBonds) may issue you a commercial bond. Before you contact a surety agency, make sure you know the kind of bond you need and the amount of coverage required. Most agencies will know the bond type and amount required for your location, industry, and project, but preparing underwriting information ahead of time can make the process quicker and easier.
In many cases, individuals with less-than-ideal credit can acquire a commercial bond, although the premium may be higher. “High risk” applicants can pay up to 20% for commercial surety bonds. New business owners might also have higher premiums since they haven’t established significant credit history. As time goes by, their creditworthiness should improve, lowering their premiums.
If someone thinks you haven’t fulfilled your contractual obligations or have committed an act that would justify a claim, they may contact the claims department of your bonding company. After submitting written notice of their claim and any supporting information and documentation, the surety company will investigate.
If they determine the claim is invalid, they’ll notify the claimant of the denial, and no further action will be taken. If the claim is valid, the surety will give the principal a chance to satisfy the claim directly. If the principal doesn’t do so adequately, the surety will satisfy the claim and pursue repayment against the principal.
Online direct surety providers make it as simple as possible to apply for commercial bonds at any time of the day or week. As soon as you’re approved and pay your premium, your bond will be effective. Compare surety providers to find the best rates and services. Once you find a helpful provider with competitive rates, renewing or obtaining new bonds can be easy and quick.
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Find your miscellaneous commercial bond and get pre-approved in a zip! We make the process as easy, quick, and painless as possible. Contact us directly if you have any questions. We’re available and more than happy to help.