• Before a bonding company is willing to issue a License & Permit Bond, it subjects the licensee to an investigation.  If the surety finds the applicant to be financially and otherwise qualified to successfully engage in the trade or profession, it issues the bond.  This pre-qualification service is among the most important that a bonding company can provide to the local government and to the public.

• The surety can strongly encourage compliance with the applicable laws, ordinances or regulations.  It can do so by reminding the licensee of his obligations and of its option to withdraw his bond if the deficiency or noncompliance is not cured promptly.  Historically, this has proven to be an effective tool in assisting the local government.  As a last resort, the surety can cancel the bond, thereby voiding the license.

• Finally, when all other efforts have failed, the surety pays losses and damages which occur.  All corporate sureties have trained staffs of professionals to handle and pay claims promptly, efficiently and fairly.

• Aren't these types of claims covered by liability insurance?

Generally, no!  Unlike the bond, insurance cannot usually cover code violations.  Public policy generally does not permit a person to insure against his own violations of law or regulation.  Accordingly, a bond is needed to protect the public from this sort of violation, just as insurance is needed to protect against accidental acts or omissions.  Liability insurance and surety bonds are both important tools for the protection of consumers who deal with regulated trades and businesses, although they perform different services.