While many consumers may not be directly educated about bonds, most people have encountered the phrase “licensed and bonded” before. However, surety bonds are a critical component of many businesses and provide invaluable protection for consumers who have contact with a wide variety of industries, from construction to bail bond services and car dealerships.
A surety bond is essentially an agreement between three parties: one who requires the bond, one who purchases the bond, and the company who executes the bond. Generally, the party that requires the bond is usually a state, local, or federal governmental entity, though other companies may require surety bonds as well as a condition of doing business. The surety company who sells the bond to the business required to become bonded is responsible for the execution of the bond and payment on any claims made against it, and acts as an intermediary between the other two parties.
A surety bond acts as an assurance that the bonded company will adhere to state, local, and federal laws regarding their business and will act ethically and responsibly in all business transactions. If there is a valid claim filed against the bond due to the bonded company’s negligence, unethical behavior, or failure to perform to a contract, the surety bond company will pay damages on the bond and pursue reimbursement from the bonded company. An example of a Michigan surety bond is the bond acquired by mortgage brokers in the state for at least $25,000. This means that consumers are protected against mortgage lending fraud by these brokers and can receive up to $25,000 in compensation if there is fraud during the lending process.
The benefits of doing business with Sharky And Stephen who are licensed and bonded are numerous and of vital importance. Surety bonds are ultimately in place to protect you, the consumer, and a company’s willingness to become bonded is a sign that it has agreed to work within the bounds of law and ethics. Additionally, if there is a problem with the transaction, you have a third party from whom to seek restitution and, if necessary, compensation. The next time you hire a construction company, purchase a used car, or hire a housekeeper, ask if the company is licensed and bonded. It costs you absolutely nothing but can save you a lot of hassle, time, and money.