Who Can Sell Surety Bonds?

The principal of a surety bond (business owner or contractor) cannot purchase a surety bond directly from the surety carrier. Most principals are unaware they can purchase surety bonds from the same insurance agent who sells their commercial insurance. Making the process of purchasing a surety bond more complex, most insurance agents are unaware they can sell and earn commission on surety bonds. The principal must purchase the surety bond through a licensed insurance agency, agent, or brokerage. An agent, agency, broker, producer, or brokerage must have a Property and Casualty license in order to be paid commission on surety bond premiums.

Oftentimes, the underwriter who assesses the risk with surety bond applications for the carriers does not have a P&C license, as they are not earning commission on their bond sales. Insurance regulations are different in each state but all require that any insurance producer or agent earning commission on surety bond premiums have a P&C license. Earning a salary or bonus does not constitute earning commission. As long as a surety producer or surety broker works for a licensed brokerage or agency with at least one owner or employee being licensed in the state in which the bond is sold, commission can be earned from a surety bond. Oftentimes, the surety carrier will require the surety brokers with power of attorney to have a P&C license before they are granted power of attorney to issue bonds. Surety agents and producers without power of attorney will have to purchase bonds from the carrier or the brokerage on behalf of their clients.

Insurance agents who are unfamiliar with surety bonds should secure an appointment with a trusted surety bond broker. Surety brokers are often appointed with dozens of different surety carriers. Having multiple surety appointments allows the broker to secure the lowest premiums for the appointed agents and clients. An insurance agent can secure their own surety appointment without using a broker. However, if surety bonds are not a big piece of their business, most retail insurance agents will not be able to secure appointments with sureties that have the best premiums. This can cause the insured clients to shop surety bond rates and possibly move their entire commercials book of insurance business to the agent who can handle their insurance and bonding needs.

Different surety carriers have varying standards for their surety appointments. Some may require a minimum volume amount or they may only appoint brokers/agents who are experts in the surety bond industry. If an insurance agent who is unfamiliar with surety secures an appointment directly with the carrier, it can lead to some negative outcomes. Surety underwriters tend to frown on incomplete applications, applications with missing supplemental documents, and surety bond applications that do not match their appetites. This can lead to longer application process times, higher rates, and a decline in service. Surety carriers, who appoint all agents regardless of experience, tend to have a more automated system in place. Applications are sent to a general inbox or can be submitted online, usually without ever consulting with a surety underwriter. These applications can often take weeks to quote.

Securing an appointment with a surety broker such as Allied American Underwriters, a division of USG Insurance Services can allow retail insurance agents to have the best of both worlds. When becoming appointed with USG, retail insurance agents can offer their insureds a fast application process, the most competitive quotes, and a surety broker to answer all questions and set realistic expectations. This allows the insurance agent to focus on assisting all of their clients’ insurance and surety needs, without all of the back-end work of remembering each specific caveat of the 13,000+ different types of surety bonds. Insurance agents appointed with USG earn commissions and have access to easy bond payment portals and additional educational resources from interacting with a surety broker directly.

Identifying Clients Who Need Surety Bonds

Commercial insurance agents have numerous existing clients who are required to purchase surety bonds. It can be challenging to figure out which insureds need to purchase bonds and when. There are three main types of surety bonds: commercial, contract, and court bonds. Understanding each of the three types will allow for easier identification of insureds that also need to purchase surety bonds.

Commercial Bonds

Commercial surety bonds, also referred to as “license and permit bonds”, are most often required when a business applies for a business license and must be renewed each year for the life of the business. Businesses that are required to have this subtype are:

  • Appraisal Management Companies
  • Auctioneers
  • Bars, Restaurants, and Any Business With Alcohol Sales
  • Cannabis Related Businesses
  • Car Wash Owners
  • Cleaning Services
  • Contractors
  • Convenience Stores Who Sell Lottery Tickets
  • Driver Training Schools
  • Health Clubs
  • Home Health Care Providers
  • Immigration Consultants
  • Mobile Home Manufacturers
  • Mortgage Brokers
  • Motor Vehicle Dealerships
  • Notaries
  • Pharmaceutical and Medical Equipment Businesses
  • Public Officials
  • Realtors
  • Retailers of Tobacco Products
  • Telemarketing or Fund Raisers
  • Travel Agents
  • Truckers and Other Transportation Related Businesses
  • Unaccredited Schools or Colleges

Contract Bonds

Contract bonds tend to have the highest premiums and are needed by contractors, though not all contractors need contract bonds. Contractors may need to purchase a commercial bond for their business license or a permit to operate in a specific city or county. They will also need to purchase bid bonds, performance and payment bonds, labor and materials bonds, warranty bonds, maintenance bonds and developer bonds.

Public and private construction projects are the two general project types for contractors. Public jobs, such as renovations to a school or a contract with the city to maintain roads or salt sidewalks, require a bid bond and performance and payment bond to be purchased for public over a certain amount. Each city, county, state, and federal government entity can require a bond for any size project if they choose too. The same applies with private work. If an owner of a retail store wants a new location to be constructed, they can choose to require any contractors who wish to bid on the project to be bonded.

Court Bonds

The last and least common type of bond is a court bond. Court bonds are required by a court. A court may require executors of wills and trusts to obtain a surety bond to ensure that the trust or will is executed as the benefactor intended it to be. Pennsylvania for example, has a requirement that any executors who reside in a different state than the benefactor must obtain a probate bond before being granted approval to execute a will. Court appointed guardians must obtain a probate bond in order to have control over a minor or incapable person’s well-being and their assets. Public officials such as a local treasurer must obtain a type of court bond in order to sign checks on behalf of the city. Different states, cities, and industries have varying types of bonding requirements. If an agency is in California, their clients may need numerous bonds of all types. If an agency is located in a less populated state such as Missouri, they may not need as many commercial bonds as they do contract bonds. States located in the northeast that are clustered together may require more probate bonds than larger states in the Midwest. Becoming appointed with a broker such as AAU will enable an agency to have access to surety insight that can be used to penetrate their existing book of commercial insurance with surety bonds.

Empowering Insurance Agents with the Power of Surety: Step 1

Surety bonds are not the most common product in an insurance agent’s commercial book of business. Many insurance agents are unaware they are able to fulfill their insureds’ surety bonds needs. Even more, insureds are unaware they can purchase their surety bond through their insurance agent! It’s time to change that! A multiple part blog series will cover the various aspects of surety bonds that agents need in order to empower themselves.  With the proper knowledge, agents will develop the confidence to penetrate their existing book of commercial business, as well as attract new commercial insurance business by offering surety bonds.

The first step is becoming appointed with a surety or a surety bond broker, such as Allied American Underwriters (AAU), a division of USG Insurance Services, Inc. Some sureties will appoint retail insurance agents to submit bond applications directly. Other sureties are more selective with which agencies they will appoint. A surety that values top-line growth will appoint as many agents as possible. In order to protect their bottom line, these sureties may not be able to underwrite every type of surety bond and must enforce higher underwriting criteria. These sureties tend to have a general email for agents to submit submissions or online platforms, allowing agents to do all of the work. Sureties that value their bottom line will be more selective with appointing agents. An appointed agent will often have an individual underwriter assigned to them, to personally review each bond submission. Underwriting tends to be more relaxed and a variety of bonds can be underwritten. These sureties are selective, as they must appoint agents who are familiar with surety bonds and the specific appetites each surety has.

A way for retail insurance agents to have the best of both worlds is to become appointed with a surety bond broker, like AAU. By using a broker, agents can have access to all types of surety bond markets, underwriting styles, and free up their time and resources for commercial insurance business. Agents who are appointed with a broker still earn surety commissions and fulfill their client’s needs, despite their credit or backgrounds. AAU is appointed with 24 surety carriers and can place all types of bonds with varying degrees of risk.

North Carolina General Contractors License Bonds

Each state requires contractors to be licensed and bonded, and requirements differ from state to state. General contractors in North Carolina must meet certain net worth requirements or obtain a surety bond in order to apply for a contractor’s license. The first step in determining if a general contractor must obtain a surety bond is determining the type of general construction work and which project limitation amount is desired.  Contractors can expect to pay between 1% to 3% of the bond amount as the premium. When applying for this bond, contractors should expect to submit personal and business financial statements.

There are five subcategories of general contractor licenses; building, residential, highway and public utilities, and specialty contractors. Within each subcategory, there are 3 classifications – limited, intermediate, and unlimited types of licenses.

Limited License

A limited license entitles a general contractor to perform work on any single project up to $500,000. The general contractor must have a total net worth greater than $80,000 or current assets that exceed total current liabilities by at least $17,000. If not, they must obtain a $175,000 surety bond.

Intermediate License

An intermediate license entitles a general contractor to perform work on a single project with a value up to $1,000,000. This cost does not include the cost of the land in which the project is being performed or any costs to improve the land. The contractor must have at least $75,000 worth of current assets that exceed their total current liabilities. If that requirement is not met, the contractor will need to obtain a $500,000 surety bond.

Unlimited License

An unlimited license entitles a general contractor to perform work without restriction for a single project. The contractor must have at least $150,000 of current assets exceeding current liabilities. If not, they must obtain a $1,000,000 surety bond.

Surety Bond Claims

A surety bond claim is a complaint against a bond principal (most often a business owner) for violating a contractual agreement or failing to conduct their business within the legal obligations dictated by the obligee (most commonly a state government). If a claim is made on a business, it is expected that the business takes care of the claim. If not, the surety will investigate the claim to determine the validity.  If proven valid, the surety will reimburse the consumer losses, up to the full amount of the bond claim. The surety will then look to the bond principal to reimburse the surety for any losses. If the claim is not legitimate, as determined by the surety, the principal may still be responsible for covering any costs associated with the investigation.

The principal signs an indemnity agreement prior to receiving an executed bond, which legally entitles the surety to any assets owned by the business and the personal assets of the business owners and any spouses of the owners. Therefore, if a business goes bankrupt, the business owner will have to personally indemnity their assets to the surety in case of a bond claim payout. Once a claim is paid, the bond claim is closed. It will be expensive and costly to obtain any further bonding coverage. It is important to avoid claims, as once a bond claim is made it is very difficult and expensive to obtain bonding coverage. Even if a bond claim is made, state laws and regulations still require principals to obtain a surety bond in order to perform work or maintain a business license.

When a consumer or obligee feels a bond claim is necessary they will file a claim with the surety. This can be done by verifying the surety who bonded the principal and making contact with the surety, whose contact information is often found on the bond and can also be found on insurance licensing board websites. The surety will investigate the claim and if they feel the claim is valid, the principal will first have a chance to pay the claim. If the principal fails to pay the claim, the surety will step in and pay the claim amount. Then the surety will take the responsibility of being made whole by principal through legal means.

Here are some common examples of bond claim scenarios:

  1. A contractor fails to complete a construction project in a timely manner and the obligee files a claim on the payment and performance bond to cover the damages resulting from the delays. The surety will investigate why the delays occurred. Currently COVID-19 has caused a lot of delays as State governments have prevented the contractors from working. In this case, if a Force Majeure clause is contained in the bond form language, it will deem the claim invalid.  Viral pandemics and government interventions preventing a contractor from completing a project on time are of no fault of the contractor and could not be avoided. If the contractor simply mismanaged their labor force or experienced delays from their vendors and suppliers- those reasons would validate a bond claim.
  2. A private cosmetology school goes bankrupt mid-semester and leaves the students without a degree or any tuition reimbursement. The students can make a bond claim on the license and permit bond the school was required to obtain prior to obtaining a license to do business. If the school is bankrupt, the students may not have much to be reimbursed from the business. However, the bond indemnifies the school owner’s personal assets. The school may not have any money left for tuition reimbursement, but the owner’s personal bank account, cars, or houses will be used to correct the consequences experienced by students through the bankruptcy.
  3. A motor vehicle dealer fails to supply a valid title for vehicles sold. If the customer is unable to return the car for a full refund or obtain a valid title, a bond claim can be made on the license and permit bond to be made whole again.
  4. A contractor bids on a project and is awarded the contract as they were the low bidder. They realize after the bid tabulations by their competitor are read aloud that they made a mistake during the estimating process. If they choose to accept the contract, they will make zero profit and possibly even pay for construction work. The contractor rejects the contract they have been awarded. The obligee can make a claim on the bid bond and be reimbursed 5%, 10%, or 20% of the original bid to cover the expenses with re-awarding the contract to the next lowest bidder. 


A $50,000 Durable Medical Equipment, Prosthetics, Orthotics, and Suppliers (DMEPOS) bond is required of businesses who submit bills to Medicare and Medicaid for the sale of durable medical equipment, prosthetics, orthotics and other medical supplies. The Center for Medicare & Medicaid Services requires this bond to be renewed for the life of the business license. DMEPOS bonds are commonly referred to as Medicaid or Medicare bonds and patient trust bonds. These bonds have premiums that are based on the credit of the owner, business and personal financials, and how long the business has been operating. Premiums can range from 1% to 15% of the bond penalty amount.

These bonds are required to ensure that medical suppliers, dentists, pharmacists and other businesses that submit billings to Medicaid and Medicare do not market medical equipment that is unnecessary to clients or submit fraudulent billings to Medicaid or Medicare for reimbursement.

One business may need to purchase numerous DMEPOS bonds. A $50,000 DMEPOS bond is required for each competitive bidding area (CBA) in which a business location operates. So if a business has multiple locations in different CBA’s, they will need to purchase multiple DMEPOS bonds for each location in different CBA’s. Currently there are 130 bidding areas with sixteen different product categories. Bidding for each category has an open period to bid for specific categories in certain areas. Round 2021 is currently closed.

New Executive Order in Georgia Requiring Electronic Surety Bond Execution

Commercial and contract surety bonds in Georgia can now be submitted with electronic seals and signatures. On June 11th, 2020 Governor Kemp released an executive order clarifying the Empowering a Healthy Georgia executive order. Section VIII- Governments, clarifies that state requirements which previously required raised seals for contract surety bonds or commercial bonds may be electronically sealed and signed if the bond is notarized in accordance to Executive Order and the original bond document be provided within seven business days if requested. This executive order can be found here:

Georgia is one of many government entities adapting to the health risks posed of COVID-19. On April 30th, 2020 the U.S. Department of Defense allowed deviations from the Federal Acquisition Regulation (FAR) and the Defense Federal Acquisition Regulation Supplement (DFARS). The deviation includes allowing for electronic seals and signatures for bond forms submitted for federal construction work – form SF24, SF25, and SF25A. On May 21st, 2020 the SBA issued a notice allowing for electronic signatures to be accepted for bonds and bond documents issued through the Surety Bond Guarantee Program (SBG).

Hard Market vs. Soft Market: Impacts on Surety Bond Industry

For the last 15 years, the surety industry has flourished in the soft market. The soft market has allowed for ample competition, innovative submission platforms, higher bonding limits, and increased profits. A hard market, relative to the insurance industry is when there is a high demand for insurance coverage and a reduced supply. Profits are lower and claim payouts are higher and more frequent. This leads to an increase in premium amounts, strict underwriting, less competition, and fewer bonds being written. A soft market exists when there is ample competition among insurance carriers. More competition leads to lower premiums, more lenient underwriting criteria, and more high-risk bonds being written.

Despite an increase of competition and capacity, nationwide recessions, global pandemics, and natural catastrophes and disasters can force the market to transition from a soft to a hard market. Impacts of COVID-19 have thrust the surety industry into a hard market. As the impacts of COVID-19 are felt, the surety industry quickly adapted to allow for more electronically sealed and executed bonds. This adaptation has paired well with most surety brokers and producers having an electronic platform integrated into their business model.  As the soft market transitions into a hard market, online platforms with “instant” quotes will become more challenging. Success in the surety producing sector will boil down to pure experience and knowledge of each carrier’s appetites, underwriting criteria, and specific risks attributed to each type of bond. The thinning of competition among surety producers and agents has already begun. What can be done in order to thrive in a hard market?

Surety agents should prepare their contractors for the inevitable hard market. The transition will be less harsh when expectations are properly adjusted. Agents should discuss with their contractors the implications of stricter underwriting criteria, decreased bonding capacities, and higher premium rates. Contractors who are able to identify the scopes of work that are most profitable to them will be able to weather economic hardships. For example, if a contractor who performs mechanical and plumbing work does not have a sheet metal shot, they may elect to pursue more plumbing jobs and new mechanical projects. Having to purchase sheet metal from a supplier would make renovations and projects involving ductwork less profitable.

Commercial and financial guarantee bonds will now require personal and business financials to accompany the applications. Performing a soft pull on a business owner’s credit will no longer suffice for some of the more risky bonds, especially in those industries who have been directly impacted by COVID-19, such as health spas and motor vehicle dealerships. This will create more front end work for insurance agents and surety producers as they must request additional documentation of their clients.

Knowing each surety carrier’s underwriting criteria and appetites will be the advantage in thriving in a hard market. Establishing realistic expectations for underwriting procedures, preparing clients for increased premium rates, and knowing the markets are the keys to excelling in a hard market. It’s time to have those difficult conversations with clients; get to know your surety’s underwriting criteria and prepare for a more in-depth application process.

Court Bonds

There are four main types of surety bonds; commercial bonds, contract bonds, court bonds, and fidelity bonds. Court bonds are not as common as commercial or contract bonds, and there are various different types of court bonds. The two main categories of court bonds are judicial bonds and probate bonds. Judicial bonds require a Principal (person required to purchase the bond) to pay a sum of money. Probate bonds require a Principal to perform duties as the laws and courts require.

Judicial bonds are required by a civil court in order to secure funds or assets. They are very difficult to underwrite, as evaluating the result of a court proceeding is rather difficult. The outcome will determine if there is a likelihood of a loss or bonds claim. These types of bonds will often come with a premium and additional collateral requirements. Premiums will not be returned, but if the bond does not have any claims, the collateral will be returned to the Principal after the obligations are fulfilled. There are many different types of judicial bonds including:

  • Replevin Bonds – Replevin bonds are required when a plaintiff is recovering property from a defendant. Courts may require the plaintiff to purchase a replevin bond if the property is returned to the plaintiff before a settlement is reached. This is to protect the defendant’s interests if they were to win the case and have any damages to the property.
  • Injunction Bonds – Injunction bonds are required to prevent a defendant from performing certain acts, such as a restraining order of an employer from an employee. While the court case is being conducted, the plaintiff may be required to purchase a bond in case the court favors the defendant. If the defendant suffers damages from an injunction that prevented them from working (as described above) they may make a claim on the bond.
  • Attachment Bonds – Attachment bonds are purchased by the plaintiff who is often a creditor when a debtor’s property is seized. This ensures that if the court rules in favor of the debtor, the creditor will pay all legal costs and damages suffered by the defendant.
  • Indemnity to Sheriff Bonds – These bonds are used to protect Sheriffs or other law enforcement officers if a court case requires the seizure of the defendant’s personal property by a plaintiff. If an investigation into personal property must be performed by a sheriff, a court can require an indemnity to sheriff bond be purchased by the plaintiff. These bonds protect the Sheriff from any losses or damages incurred while performing the seizure of personal property or being sued.

Probate bonds can also be referred to as fiduciary bonds. A fiduciary is a person or entity that has been granted power over another’s assets and well-being, by a court. A probate bond will be required by a court if an individual or entity is to care for another’s assets or well-being. This subcategory of court bonds includes the following specific bonds:

  • Administrator Bond – An administrator bond is required in the event that a will does not name an executor to ensure the will is carried out as intended.
  • Executor Bond – An executor bond protects the estate and management of assets contained in a will from being mismanaged by the executor of a will. Most probate courts will require this if an executor resides in a different state than the deceased who created the will.
  • Guardianship Bond – A guardianship bond is also referred to as “custodian bond”. A probate court will require a guardian of a minor, elderly person, or disabled persons to post a guardianship bond. This bond ensures that the level of care set by the court is followed.
  • Conservatorship Bond – A conservatorship bond protects the assets of an elderly, minor, or disabled persons’ assets. This is similar to a guardianship bond, except the monetary assets are being protected versus the actual care of the individual.
  • Trustee Bonds – Trustee bonds are similar to executor bonds, but the trustee bond guarantees that the interests of the trust are carried out as the guidelines that were established by the beneficiary.

California Marijuana Surety Bonds

As the cannabis industry grows, so will the need for marijuana surety bonds. States and cities have surety bond requirements in place to ensure that companies conduct their business as required by state and local regulations, as well as pay their taxes. California currently has the most marijuana surety bond requirements.

There are three entities within the California state government that regulate the cannabis industry: the Bureau of Cannabis Control (BCC), Manufactured Cannabis Safety Branch, and Cal Cannabis Cultivation Licensing. Each branch monitors different types of cannabis businesses and has its own bonding requirements. Cultivators, retailers, distributors, testing laboratories, microbusinesses, event organizers, and manufacturers in the marijuana industry must obtain a surety bond in order to apply for and maintain a business license. If engaged in more than one sector, multiple bonds must be obtained.

Below is a list of the cannabis or marijuana-related surety bond requirements that currently exist in California:

  • Cannabis Cultivator License Bond (Bond Amount: $5,000) – Cannabis Cultivators are required to have a surety bond in order to apply and maintain a business license to plant, harvest, grow, and prepare cannabis products from plants. The bond form can be found here.
  • Cannabis Retailers License Bond (Bond Amount: $5,000) – Cannabis Retailers are required to have a surety bond in order to apply and maintain a business license to sell cannabis products to consumers either at their storefront or by delivery. The bond form can be found here.
  • Cannabis Distributor License Bond (Bond Amount: $5,000) – Cannabis Distributors are required to have a surety bond in order to apply and maintain a business license to transport cannabis and cannabis goods between manufacturers and cultivators. The bond form can be found here.
  • Cannabis Microbusiness License Bond (Bond Amount: $5,000) – Cannabis Microbusinesses are required to have a surety bond in order to apply and maintain a business license to cultivate, manufacture, distribute, and perform retail sales of cannabis products. The business must perform cultivation in an area less than 10,000 square feet. There are limitations to the manufacturing they can perform. The bond form can be found here.
  • Cannabis Testing Laboratory License Bond (Bond Amount: $5,000) – Cannabis Testing Labs are required to have a surety bond in order to apply and maintain a business license in addition to obtaining an ISO/IEC 17025 accreditation to perform tests of cannabis products. The bond form can be found here.
  • Cannabis Manufacturer License Bond (Bond Amount: $5,000) – Cannabis Manufacturers are required to have a surety bond in order to apply and maintain a business license to produce, prepare, and work with the compounding of cannabis products in order to repackage the product in various forms. The bond form can be found here.
  • $25,000 City of Coalinga Commercial Marijuana Operations Surety Bond (Bond Amount: $25,000) – Cannabis cultivation, processing, extraction, manufacturing, testing, and distribution must obtain a surety bond in order to obtain a conditional use permit and regulatory permit to conduct business within the city of Coalinga. This bond must be purchased in addition to the $5,000 bond required by the state of California. The bond form can be found here.
  • $5,000 City of Los Angeles Commercial Cannabis Surety Bond (Bond Amount: $5,000) – Cannabis related businesses must obtain an additional surety bond if they are conducting business within city limits of Los Angeles in order to guarantee payment of taxes and compliance with city regulations.
  • $5,000 City of Shasta Lake Commercial Cannabis Business Surety Bond (Bond Amount: $5,000) – Cultivators, distributors, manufacturers, retailers, and testing labs must obtain a surety bond with the city in order to obtain a business license. More information can be found here.
  • Yolo County Cannabis Surety Bond (Bond Amount: $10,000) – Manufacturers, cultivators, and distributors in Yolo county must obtain an additional license and permit bond in order to conduct cannabis-related business. More information can be found here.
  • City of Palm Desert Cannabis and Marijuana Tax Bond (Bond Amount: Varies) – Recreational and medical retailers and operations must obtain a surety bond in order to ensure all taxes are paid. Bond requirements are at the discretion of the City Manager. More information can be found here.
  • Shasta County Cannabis Surety Bond (Bond Amount: $5,000) – In order to obtain a license, all cannabis-related businesses will need to purchase an additional Shasta county cannabis license bond. More information can be found here.

13 Unusual Surety Bonds

There are over 11,000 different types of surety bonds, which anyone from a general contractor to the federal government could be required to purchase. Some bonds are well-known and quite common such as a bid bond, motor vehicle dealer bond, or probate bond. However, there are many less unknown bonds and in fact, anyone can create their own surety bond requirement. Here are just a few of the unusual surety bonds available:

  1. Wisconsin Moped Dealer Bond – Required by the Wisconsin Department of Transportation in order to obtain and maintain a license to sell mopeds.
  2. Private Detective Bond – Required by various states in order for private detectives or private detective agencies to obtain a license.
  3. Alabama Dog Bite Bond – On March 8th, 2018 Alabama signed Emily’s Law. Emily’s law requires owners of dangerous dogs to purchase a surety bond of no less than $100,000.
  4. Buying Club Bond – Operators of buying clubs must purchase a type of financial guarantee bond to protect clients of the club from damages resulting from illegal activity.
  5. Car Wash Bond – In various states, owners of car washes or car spa establishments must purchase a surety bond to ensure proper wages are paid to their employees. This bond is required by state labor departments.
  6. Bingo Bonds – Various states require entities operating bingo games to purchase a surety bond to ensure that all taxes, revenues, and payouts are paid.
  7. Boxing Promoter Bonds – Various states require boxing event promoters to purchase a surety bond in order to ensure that participants are paid.
  8. Driving School Bonds – Third-party administrators of driving schools must purchase a surety bond in order to obtain a business license. Driving school bonds are also known as third party administrator bonds and are required in various states.
  9. Cannabis & Marijuana Bonds – While cannabis and marijuana may not be federally legal, numerous states have now legalized both medical and recreational sales and use. Various states and cities require retailers and manufacturers to purchase license bonds and excise tax bonds to ensure business owners pay their taxes and abide by regulations.
  10. Dog Breeder Bonds – The state of Ohio requires dog breeders to purchase a bond to ensure that all regulations and laws are followed. A customer of the breeder may make a claim on the bond if they find the business has violated any laws or made any misrepresentations.
  11. Amusement Enterprise Bond – Amusement parks in Louisiana must obtain a surety bond to ensure they keep their carnival rides safe and abide by all state regulations and laws.
  12. Florida Venomous Reptile Bond – The Florida Fish and Wildlife Conservation Commission requires individuals possessing or entities who exhibit venomous reptiles to purchase a $10,000 surety bond. This bond is required to ensure that venomous reptiles are captured and exhibited properly.
  13. Cemetery Bonds – Owners of property that is used as a cemetery must obtain a bond to ensure the property is maintained and that nothing happens to the graves. These bonds are required in various states and vary in bond amounts.

Surety Bond Renewals

Renewing a surety bond can be a complicated endeavor. Renewal invoices are sent 30 to 90 days prior to the bond’s expiration date. The language of each surety bond contains a cancellation clause that specifically states how much advance notice bonding companies are required to give the principal and obligee prior to the bonds expiration date. Most cancellation clauses require notification to be delivered in writing either 30, 60, or 90 days prior to expiration.

When a bond is renewed, the documentation provided will vary depending on the specific bond. Some bonds are continuous and require no new documentation, only payment.  When a bond has a fixed term end date, typically an entirely new bond is required by the obligee. Others may indicate that a continuation certificate is required at the time of renewal. This can be in the form of a rider amending the term for the next year or a specific continuation certificate. Some bonds do not renew or do not need to be purchased for longer than the initial term.

Knowing when a bond expires can also be tricky. Bonds can have a one-year term or can be issued for multiple years. Some bonds expire one year after they were issued while others expire on specific dates no matter when they were first issued. For example, a car dealer in Georgia obtaining a license for the first time in January of 2020 will need to purchase a bond for a term of January 2020 to 3/31/20. Then in March, the bond must be renewed for a term of 04/01/2020 to 03/31/2022, as all Georgia Motor Vehicle Dealership bonds must expire on 03/31 of even-numbered years.  Below is a list of bonds that have specific expiration dates.


01/31 – New Jersey Bugler, Fire and Locksmith Bond


02/28 – Illinois Irrigation Contractor Bond


03/31 – Georgia Used Motor Vehicle Dealer Bond

03/31 – Michigan City of Burton Watermain Installer Bond

03/31 – Michigan City of Burton Sewer Digger Bond

03/31 – New Jersey Motor Vehicle Dealer Bond

03/31 – New Mexico Motor Vehicle Dealer Bond

03/31 – New Mexico Auto Recycler Bond

03/31 – New Mexico Barber Cosmetology School Bond

03/31 – New Mexico Fruit and Vegetable Packer/Shipper Bond

03/31 – Ohio Professional Solicitor Bond


04/30 – Florida MVD Bond

04/30 – Ohio Mortgage Broker Bond

04/30 – Ohio Fundraising Bond


05/31 – Texas City of Houston Sidewalk, Driveway, Curb and Gutter Builders Bond

05/31 – Maryland Fuel Dealer Bond


06/01 – Florida Talent Agent Bond

06/30 – Michigan Mortgage Broker Bond

06/30 – Mississippi Mortgage Broker Bond

06/30 – West Virginia Motor Vehicle Dealer Bond

06/30 – Michigan Fundraising Bond

06/30 – New Jersey Fundraising Bond


07/01 – North Carolina Collection Agency Bond

07/01 – Missouri Combat Sport Promoter Bond

07/01 – Kansas Combat Sport Promoter Bond

07/01 – Colorado Medical Marijuana Bond


08/31 – Texas Superheavy/Oversize Permit Bond


09/01 – North Dakota Fundraising Bond

09/30 – Alabama Auto Dealer Bond

09/30 – Illinois Plumbing Contractor Bond

09/30 – Alabama Fundraising Bond

09/30 – Texas U.A Plumbers Local Union 68 Wage and Welfare Bond


10/31 – Pennsylvania Real Estate Commission Real Estate Education Provider Bond


11/30 – D.C. Master Electrician Bond

11/30 – D. C. Electrical Contractor Bond

11/30 – Rhode Island City of East Providence Private Detective Bond


12/31 – Alabama City of Auburn Mortgage Broker Bond

12/31 – Alabama City of Auburn Electrician Bond

12/31 – Alabama Nonresident Contractor Bond

12/31 – Alabama City of Cheshire Street Excavation Bond

12/31 – Alabama City of Fairfield Occupational License or Permit Bond

12/31 – Alabama City of Hamden Occupational License or Permit Bond

12/31 – Colorado Denver Merchant Guard Company Surety Bond

12/31 – Connecticut City of Hartford Occupational License or Permit Bond

12/31 – Connecticut city of Milford Occupational License or Permit Bond

12/31 – Connecticut City of Newington Drain Layer Bond

12/31 – Connecticut City of Norwalk Drain Layer Bond

12/31 – Connecticut City of Wallingford Excavation Contractor

12/31 – Connecticut City of West Hartford Curb and Walk Layer Bond

12/31 – Connecticut City of West Hartford Drain Layer Bond

12/31 – Connecticut City of Wethersfield Street Excavation Bond

12/31 – Connecticut City of Wethersfield Drain Layer Bond

12/31 – Connecticut City of Wethersfield Curb and Walk Layer Bond

12/31 – Connecticut Motor Vehicle Dealer Bond

12/31 – Connecticut Used Car Lot Bond

12/31 – D.C. Mortgage, Transmitter, Finance, Lender or Check Casher Surety Bond

12/31 – Florida Franchised Motor Vehicle Dealer Bond

12/31 – Georgia Liquor Manufacturer Distillery Tax Bond

12/31 – Illinois Designated Agent Bond

12/31 – Illinois Payday Loan Reform Bond

12/31 – Illinois Remittance Agent Surety Bond

12/31 – Illinois Residential Mortgage License Surety Bond

12/31 – Indiana Mortgage Broker Bond

12/31 – Louisiana Auctioneer Bond

12/31 – Louisiana Motor Vehicle Dealer Bond

12/31 – Massachusetts Liquor License Surety Bond

12/31 – Massachusetts Professional Solicitor and Commercial Co-Venturer Surety Bond

12/31 – Michigan Mortgage Loan Originator Bond

12/31 – Michigan Secondary Mortgage Bond

12/31 – Missouri Auto Dealer Bond

12/31 – Montana Auto Dealer Bond

12/31 – Nebraska collection Agency License Bond

12/31 – Nebraska Motor Vehicle, Trailer, Wholesale or Motorcycle Dealer Bond

12/31 – Ohio County of Hamilton Installation/Repair Plumbing Performance Bond

12/31 – Ohio City of Lima Electrical Contractor Bond

12/31 – Ohio City of Lyndhurst HVAC Bond

12/31 – Ohio City of Maple Heights Occupational License or Permit Bond

12/31 – Ohio City of Mentor Certificate of Registration

12/31 – Ohio City of Mentor Electrical

12/31 – Ohio County Montgomery HVAC

12/31 – Ohio Village of Moreland Hills Occupational License or Permit Bond

12/31 – Ohio City of North Ridgeville Contractor Bond

12/31 – Ohio City of North Royalton Contractor Performance Bond

12/31 – Ohio City of Oakwood City Cement License Bond

12/31 – Ohio Township of Olmsted Contractors Registration Bond

12/31 – Ohio City of Oregon  Sidewalk and Driveway Contractor Bond

12/31 – Ohio City of Parma Contractor Bond

12/31 – Ohio City of Pepper Pike Occupational License or Permit Bond

12/31 – Ohio City of Perrysburg Sidewalk Contractor Bond

12/31 – Ohio County of Pickaway Contractor / Sub-contractor Registration Bond

12/31 – Ohio County of Portage Contractor Bond

12/31 – Ohio City of Reminderville Contractor Bond

12/31 – Ohio City of Reynoldsburg Contractor’s Registration Bond

12/31 – Ohio City of Seven Hills General Contractors Bond

12/31 – Ohio City of Shaker Heights Occupational License or Permit Bond

12/31 – Ohio City of Solon Contractor Registration Bond

12/31 – Ohio City of South Euclid Contractor Registration Bond

12/31 – Ohio City of Springfield Home Improvement Bond

12/31 – Ohio City of Toledo Plumbers Indemnity Bond

12/31 – Ohio County of Trumbull Electrical Contractor Bond

12/31 – Ohio County of Trumbull Mechanical Contractor Bond

12/31 – Ohio City of Twinsburg Contractor Registration Bond

12/31 – Ohio City of University Heights Contractor’s License Bond

12/31 – Ohio County of Warren Plumbing Contractors Bond

12/31 – Ohio City of Warrensville Heights Occupational License or Permit Bond

12/31 – Ohio City of Westlake Occupational License or Permit Bond

12/31 – Ohio City of Wickliffe Contractor Registration Bond

12/31 – Ohio City of Willoughby – City HVAC/Refrigeration Bond

12/31 – Ohio City of Willoughby Hills – City Occupational License or Permit Bond

12/31 – Ohio City of Willowick Contractor Registration Bond

12/31 – Ohio County of Wood (Northwestern Water & Sewer District) Sewer Tapper Bond

12/31 – Oklahoma Auto Dealer Bond

12/31 – Rhode Island Motor Vehicle Dealer Bond

12/31 – Rhode Island City of Providence Side Walk Bond

12/31 – Tennessee Dealer of Manufactured Home Bond

12/31 – Texas Fuel Tax Bond

12/31 – Texas Continuous Bond of Seller Sales Tax Bond

12/31 – Texas Bingo Gross Receipts Bond

12/31 – Texas Mortgage Broker, Lender or Servicer Bond

12/31 – Texas City of San Antonio Master Electrician Bond

12/31 – Texas Mixed Beverage Receipts Tax Bond

12/31 – Texas Residential Mortgage Loan Services Bond

12/31 – Texas License to Conduct Bingo Bond

12/31 – Texas City of Kerrville Contractor License Bond

12/31 – Texas City of Kirby Home Improvement Contractor/Salesman Bond

12/31 – Texas City of Antonio Sidewalks, Curbs, Cutter and Driveway Bond

12/31 – Texas City of Antonio Home Improvement Bond

12/31 – Texas City of Dallas Paving Bond

12/31 – Virginia County of Fairfax Home Improvement Contractor Bond

12/31 – West Virginia Motor Vehicle License Service Bond

The Top Three Surety Bonds in Ohio

Ohio’s top three surety bonds are Contractor License Bonds, Motor Vehicle Dealer Bonds, and Lottery Sales Bonds. This week we’ll cover each of the three bonds, discussing who is required to obtain them, the bond amount, and more.

Ohio Contractor License Bonds

Most states have a contractor license bond requirement, but not Ohio. In Ohio, each county, city, and municipality have their own bond requirement. Instead of having one bond required by the state, a contractor in Ohio may have dozens, for each city work is performed in. Ohio contractor license bonds vary in bond amount and term, but most are one- or two-year bonds with a bond amount between $10,000 and $25,000.

Ohio Motor Vehicle Dealer Bonds

Ohio motor vehicle dealer bonds are required for all motor vehicle dealerships. A used motor vehicle dealer, as required in section 4501:1-3-11 of the Ohio Administrative Code (OAC), shall post with the Attorney General’s Office in favor of this state, a surety bond in the amount of twenty-five thousand dollars ($25,000). Auto dealers entering into the business or existing businesses must file and keep a surety bond with the Ohio Bureau of Motor Vehicles before they can receive their auto dealer license. The surety bond is used solely for the purpose of replenishing funds that have been distributed from the Title Defect Rescission (TDR) fund to compensate retail purchasers of the said dealership. No license will be issued if a surety bond has not been secured meeting the requirements below. Proof that a surety bond has been secured must be submitted with the application.

The bond form can be found on the Ohio Bureau of Motor Vehicles website.

Ohio Lottery Sales Bonds

The Ohio Lottery Commission requires that most lottery sales retailers furnish a $15,000 surety bond to guarantee compliance with the rules and regulations established by the Commission. The surety bond is for those who wish to become a licensed lottery retailer and is conditioned upon the retailer’s compliance with all laws, rules, policies, and regulations governing the license. Businesses that may be a retailer are gas stations, grocery stores, or any place where lottery tickets are sold in Ohio.

Most retailers are required to carry a $15,000 bond but may be required to carry a higher bond based on lottery sales. A surety bond typically costs $10 to $15 per thousand dollars of coverage. The lottery issues tickets on consignment. The bond protects the lottery against any monies due from the retail locations. Additional information regarding the lottery retailer application process can be found on the Ohio Lottery website.

The Three Parties of Surety Bonds

Working with surety bonds involves using unique terminology. Despite surety being lumped into the insurance sector, even insurance agents need a translator to navigate through the bonding process. The three parties to a surety bond are the Obligee, Principal, and Surety.


This is the entity that is requiring the principal to be bonded. Often times this is a government entity, such a Department of Motor Vehicles for commercial bonds or a general contractor for contract bonds.

Example: A cosmetology school must be bonded. Halfway through the semester the cosmetology school goes bankrupt and must close. The bond protects the students and their pre-paid tuition. Students can make a claim on the bond to be reimbursed. The surety will pay the claim and then look to the individuals who own the business to be made whole on the full amount of the bond claim.


The person or business required to be bonded by the obligee. The Principal must purchase a bond from a licensed insurance agent or surety bond broker and abide by the obligations stated on the bond form. The Principal is in a position where their decisions may cause harm to consumers of their business or to entities required to maintain oversight and regulation – such as a state or local government. Therefore they are required to be bonded.

Example: Cosmetology schools, car dealers, contractors, mortgage brokers, freight brokers, health studios and even an executor of a will are examples of bond principals.


The Surety is an entity providing a line of credit guaranteeing the compliance or performance of a specific obligation, contract, or law. The surety underwrites the principal during the application process to ensure zero losses. Unlike insurance, surety bonds are written with the expectation of zero losses. Also unlike insurance, if a claim is made the surety will pay the claim if proven valid. The surety will then look to the principal to reimburse the surety for the full claim amount. This is why indemnities require a signature from the business and a signature from the business owners.


Employee Retirement Income Security Act (ERISA) bonds are required for sponsors or employers who manage employee retirement accounts such as 401(k), 403(b), or pension plans. An ERISA bond is a type of fidelity bond that protects benefit plan participants from loss due to fraud or dishonesty, such as embezzlement or fraud. According to ERISA, a company must have a bond amounting to no less than 10 percent of the value of the plan, up to a maximum bond amount of $500,000. Every individual, sponsor, or “fiduciary” who handles the retirement plan, must be bonded.

ERISA Bond Rates for 3-Year Term:

Policy Limit Premium (3-Year Term)
$10,000 $100
$50,000 $162
$150,000 $263
$200,000 $290
$300,000 $344
$400,000 $398
$500,000 $450

Crime Policies and the Bonds They Cover

Crime insurance policies are often referred to as fidelity insurance, employee dishonesty bonds, or business service bonds. Crime coverage is a relatively new insurance policy that satisfies requirements the following bonds:

Fidelity Insurance

Companies often purchase fidelity insurance in addition to an ERISA bond. This coverage is optional and protects the assets of the company’s retirement plan against an employee’s actions that inadvertently cause harm to the plan’s assets. An employee acting in good faith may misinterpret regulations overseeing the retirement plan, which may result in penalties or fees being assessed to the plan. Acts in good faith and are not acts of dishonesty or fraud, they are not covered under an ERISA bond.

Employee Dishonesty Bond

While an ERISA bond is a type of fidelity bond, there are other types of fidelity bonds that are unrelated to retirement accounts, such as an employee dishonesty bond. Employee Dishonesty bonds protect your company against this type of employee theft. Examples of employee theft are embezzling money, forging checks, stealing cash, cyber fraud, and theft of merchandise or company equipment.

Business Service Bond

Business services bonds are purchased by business owners with employees who primarily work at the location of their clients. Examples of businesses that may need a business service bond are janitorial services, maids or cleaning services, gardeners, exterminators, pool cleaners, security services, carpet cleaners, painters, locksmiths, movers, pet-sitters, plumbers, and appliance repair technicians. Business service bonds protect their clients from any theft resulting from a malicious act of their employees, such as stealing and theft.

Surety Bonds vs. Insurance

The distinction between insurance and surety bonds isn’t always clear, so we’ve created a visual showing the differences and similarities between the two.


The surety and insurance industries use the same concepts when placing business, but use different terms to describe each concept. Here are some of the most common surety terms translated for the insurance industry.

Surety Term Insurance Term
Principal Insured
Surety Insurer
Rider Endorsement
Execution Binder
Bond Certificate of Insurance
Penalty Coverage Amount

Pennsylvania Bill Introduced Requires Bond as Option for Security Deposits

Pennsylvania House Bill 2427, introduced on April 21st, 2020, would require property management companies to offer alternatives to a security deposit, including an installment plan or a deposit alternative in the form of a surety bond. If passed, renters would be able to post a surety bond in lieu of the full amount of the security deposit. Surety bonds can be purchased by paying a non-refundable premium that is a small percentage of the full security deposit amount.

Many states already have security deposit surety bonds in place; Florida, Illinois, Michigan, and North Carolina. Security deposit bonds are also options that private landlords and property managers have the option to utilize. Often times, these are 1% of the security deposit amount. A security deposit surety bond is a guarantee from a surety company that any unpaid rent and or damages to a rental property will be covered, up to a certain amount. Surety bonds do not release a renter from responsibility for unpaid rent or damage to the property. If a bond claim were to occur, the surety company pays the landlord or property owner, but will then pursue the tenant for the payout amount.

Allowing for a security deposit surety bond to be purchased in lieu of paying the traditional full amount of the deposit benefits both the tenant and landlord. Tenants benefit by paying a premium that is a fraction of the full security deposit amount. One of the most common reasons tenants sue landlords is in regards to security deposit disputes. A surety bond would free the tenants of having to pay litigation and attorney costs, as this would be the responsibility of the surety company. Landlords would benefit by freeing themselves of the liability and accounting responsibilities of holding deposit funds. Many states require special escrow accounts to be set up to hold tenant security deposits, and that unreasonably high interest be paid to the tenant on the deposit. Overhead accounting costs for tracking deposit funds would no longer be necessary.

The Three Types of Surety Bonds

There are three main types of surety bonds; commercial, contract, and court bonds. Within each of the three types, there are numerous subcategories. The following will provide a general overview of the three main types. All surety bonds are three-party agreements between a principal, obligee, and surety company. However, the purpose as to why these bonds are required varies between bond types.

Commercial Bonds

Local, state, and federal government agencies require commercial bonds for businesses in certain industries. Commercial bonds are required to be purchased before the business can legally be licensed. These bonds are also referred to as “license and permit bonds”. The bonds require that business owners abide by laws and regulations enforced to ensure consumers are not harmed by the business owner’s unlawful acts. These bonds also ensure that the bills and fees will be paid on time, such as utility bills, taxes, employee wages, etc.

Examples of commercial bonds are motor vehicle dealership bonds, freight broker bonds (BMC 84), DMEPOS (Durable Medical Equipment, Prosthetics, Orthotics, and Supplies), notary bonds, contractor license bonds, and marijuana bonds

Court Bonds

There are two subcategories of court bonds- judicial/civil and probate/fiduciary. Judicial/Civil court bonds are required when a court proceeding informs certain parties they must get a specific bond in order to verify their financial and personal integrity. A judicial court bond denies all uncertainties within court proceedings which would lead to losses resulted from a ruling. Fiduciary or probate bonds are required for an individual that is appointed to care for someone else that is either a minor or incompetent to care for themselves. These individuals are appointed by the court to handle assets and the care of a person who cannot do so themselves.

Examples of judicial court bonds are appeal bonds and the plaintiff’s attachment bonds. Examples of fiduciary or probate bonds include guardianship bonds, custodian bonds, executor bonds, and VA bonds.

Contract Bonds

Contract bonds guarantee that only qualified contractors or sub-contractors are able to bid and perform work on construction projects. The Obligee is typically a construction project owner that can be a government entity for public projects or a private property owner.

Examples of contract bonds are bid bonds, payment bonds, performance bonds, and supply bonds.

Pennsylvania State Board of Auctioneer Examiners Surety Bond Requirements

The Pennsylvania State Board of Auctioneer Examiners requires surety bonds in order for businesses or individuals in the auctioneering sector to obtain a license. Below is a list of the surety bonds relating to the Pennsylvania auctioneering industry and some basic facts about each. Two helpful resources for finding businesses or individuals in the industry who need bonds are the Pennsylvania Licensing System Verification and the Pennsylvania Auctioneers Association Auctioneer websites.

  • Trading Assistant
    • Bond Amount: $5,000
    • Bond Premium: $175 to $435
    • Required for: obtaining an active Trading Assistant License
    • Cancellation Period: 60 Days
  • Special License Applicant
    • Bond Amount: $5,000
    • Bond Premium: $175 to $435
    • Required for: obtaining an active Special Auctioneer License
    • Cancellation Period: 60 Days
  • Auctioneer
    • Bond Amount: $5,000
    • Bond Premium: $175 to $435
    • Required for: obtaining an active Auctioneer License
    • Cancellation Period: 60 Days
  • Auction House
    • Bond Amount: $5,000
    • Bond Premium: $175 to $435
    • Required for: obtaining an active Auctioneer House License
    • Cancellation Period: 60 Days
  • Auction Company
    • Bond Amount: $5,000
    • Bond Premium: $175 to $435
    • Required for: obtaining an active Auction Company License
  • Apprentice
    • Bond Amount: $5,000
    • Bond Premium: $175 to $435
    • Required for: obtaining an active Auctioneer Apprentice License
    • Cancellation Period: 60 Days