Many businesses dwell under the unfortunate misunderstanding that they do not need high risk surety bonds because they have general liability insurance already. Besides, who wants something called “high risk” anything? This is not good, because the coverage that you get from surety bonds is exactly what you get with a high risk surety bond. Being without it as a business is very dangerous; more or less so depending on the type of business. How does a surety bond work? Let’s take a look, and then see how high risk bonds fit into that picture. Let me explain.
First, surety bonds are security instruments set up for the protection of the client. They are essentially money put on deposit with a surety bond company so that should something occur, your client can be reimbursed for whatever loss has occurred. Let’s say you had a death in the family that caused you to be unable to finish your job to contractual standards. The surety bond would come in and pay the client, hire another contractor or whatever they needed to do. Then you would pay the surety bond company back. This is the life cycle of a surety bond in use. Now, how does a high risk surety bond differ? Let’s look.
In point of fact, there is no difference from the usage side. The “high risk” is only to the surety bond company if you have bad credit.