Delegating tasks to other professionals can ultimately save your business time and resources, but it also brings a couple of risks along with it. When you hire someone else to complete a job for you, you need to know it’ll get done, and get done correctly. That’s why surety bonds exist.

An Illinois independent insurance agent can help you find the right type of surety bond to protect your business against an unfinished project or botched job. But first, here’s a closer look at this important kind of protection.

What Is a Business Surety Bond?

Simply put, a surety bond is a contract between two parties to ensure that a job will be completed. The second party, known as the principal, is guaranteed by the surety bond that the third party, or obligee, will agree to the terms stated by their contract.

Surety bonds will pay out a sum to the person or business who hired a worker, like a contractor, to do a job if this worker fails to fulfill the contract. After this payout occurs, the bond’s issuer can then pursue legal action against the contractor or other worker.

How Does a Surety Bond Work in Illinois?

According to insurance expert Jeffery Green, surety bonds are designed to protect businesses from harm caused by incomplete or botched jobs performed by external workers, like contractors. They’re used for contracts, licensing and permits, bail, and more.

The obligee, or the business hiring the external worker to do a job, is guaranteed by a surety bond that the financial risk they’re taking by entrusting this work to a contractor or external worker won’t harm them. If the principal, AKA the contractor or other hired worker, fails to complete the job, or actually botches the job, the surety bond will reimburse the obligee.

What Does a Surety Bond Cover in Illinois?

Surety bonds have an important purpose, to protect obligees from incomplete or botched projects. They provide a few important benefits for businesses in Illinois.

Surety bonds in Illinois are used to cover the following:

• Fraud and theft costs: Surety bonds can protect your business if a worker steals from you or commits fraud.
• Lawsuit costs: Surety bonds can pay for lawsuits against the contractor or other worker if they don’t fulfill their end of a contract.
• Hired help costs: Surety bonds protect businesses if contracted work is not completed correctly, by returning their financial investment.

Your Illinois independent insurance agent can further explain the importance of surety bonds for your business.

Surety Bond Stats

Before shopping for the right type of surety bond for your business, it’s helpful to learn a little bit about the industry overall. Check out some surety bond stats below.

Surety bonds direct written premium

The surety industry has protected more than $9 trillion in surety exposure for both contract and commercial obligations. In 2017, surety bonds provided $600 billion in protection. Since 1998, about $25 billion in losses have been paid out by surety bonds, and an additional $50 billion has been paid out for underwriting, loss adjustment, and other expenses.

Over the past couple of decades, businesses have received a huge amount of protection thanks to surety bonds. That’s why it’s so important to look into getting a surety bond if your business needs to hire external help for a project.

Types of Surety Bonds in Illinois

It’s important to work with an independent insurance agent to select the right type of surety bond for your business’s specific needs. You’ll be able to choose from several types of surety bonds available in Illinois, including:

You might want to look into researching each type of surety bond available in your area before contacting your independent insurance agent, so you can be extra-certain you’ll be matched up to the best kind for your business.

Is a Surety Bond the Same as Insurance?

Green said that surety bonds are not the same as insurance. The surety bond’s issuer can pursue legal action after a loss has been paid, which sets surety bonds apart from insurance. Surety bonds are also not sold by insurance companies.

Surety bonds are basically a special form of credit. The principal, such as a contractor, is the one obligated to pay back the bond if a contract is unfulfilled — not the surety itself. In other words, there’s no insurance company to fulfill a claim if there’s a loss.

Here’s How an Illinois Independent Insurance Agent Can Help

When it comes to protecting businesses and individuals against unfulfilled contracts, no one’s better equipped to help than an independent insurance agent. Illinois independent insurance agents can help provide you with the best coverage and rate options. They’ll assist you in your search for the best surety bond that fits your budget and ensures the job gets done right.