Bond FAQs

This is the most important thing to understand about bonds: a bond is not insurance for you.

A surety bond is a three-party agreement. You (the principal) purchase the bond. The party requiring it — a municipality, project owner, or court (the obligee) — is the one the bond protects. The surety company backs your obligation with its financial guarantee.

Insurance protects you from covered losses. A bond guarantees to someone else that you will fulfill an obligation — finish the job, follow the licensing rules, pay your subs.

And here’s the part that surprises people: if the surety pays a claim on your bond, you are generally required to reimburse the surety. That’s the indemnity agreement you sign when the bond is issued.

Bottom Line

Insurance transfers your risk. A bond guarantees your performance to someone else — and you’re on the hook to repay the surety if it ever has to pay.

The bonds we write most often for Fairfield and Greater Cincinnati businesses fall into four buckets:

• License and permit bonds — required by many municipalities before contractors can register or pull permits
• Contract bonds — bid, performance, and payment bonds for construction projects, especially public work
• Court and fiduciary bonds — required in certain legal and probate situations
• Fidelity and employee dishonesty bonds — protecting against employee theft, often required for cleaning services, property managers, and businesses that work in customers’ homes

Which ones you need depends on your trade, the cities you work in, and the contracts you sign. Requirements vary from one municipality to the next — we deal with the local forms and filing quirks every week.

Bottom Line

Most Ohio businesses encounter bonds through licensing, contracts, or courts. The requirement comes from the obligee — our job is getting you the right bond quickly at the best available rate.

You’ve seen the phrase a thousand times: licensed, bonded, and insured. Here’s what it actually means.

Insured means the business carries insurance — general liability, commercial auto, workers’ comp — that responds to accidents and injuries the business causes.

Bonded means a surety has guaranteed some obligation of the business — usually to a municipality (license bond) or a customer/project owner (contract bond).

They answer different questions. Insurance answers: what if something goes wrong accidentally? A bond answers: what if the business doesn’t do what it promised?

Many contracts, municipalities, and customers require both — and advertising that you’re licensed, bonded, and insured is a real credibility signal in the trades.

Bottom Line

Bonded and insured are not the same thing, and one doesn’t replace the other. Most contractors in this area eventually need both.

Far less than the bond amount — that’s the good news.

You pay a premium that is a percentage of the bond amount. As illustrative examples from what we commonly see: many municipal license and permit bonds run roughly $100–$300 per year, and well-qualified applicants on contract bonds often pay in the neighborhood of 1–3% of the contract amount. Actual pricing varies by bond type, amount, and your qualifications.

What drives your rate:

• The bond type and amount
• Your personal credit
• Business financials (for larger contract bonds)
• Experience and track record in your trade
• Claims history

Because we’re independent, we can shop multiple surety markets — including programs for applicants other sureties decline.

Bottom Line

Most bonds cost a small fraction of their face amount. Credit and financials drive the rate — and shopping multiple sureties is how you keep it down.

Because in most Cincinnati-area municipalities, you can’t register your trade or pull a permit without one.

Cities and counties set their own contractor licensing rules, and many require a license or permit bond as a condition of registration — the bond guarantees you’ll follow the local building codes and regulations. The required amounts and forms differ from one municipality to the next.

We keep contractors compliant across multiple jurisdictions: one call, and we handle the bond forms for each city you work in — so a missing bond never holds up a permit or a job.

If you’re bidding public or larger commercial work, you’ll also encounter contract bonds — covered in the next question.

Bottom Line

Trade contractors around Greater Cincinnati typically need license or permit bonds city by city. Get them handled before the permit window — not while the job waits.

These are the contract bonds of the construction world, and public projects generally require them.

• Bid bond — guarantees your bid is serious: if you win and walk away, the bond responds
• Performance bond — guarantees you’ll complete the project according to the contract
• Payment bond — guarantees your subcontractors and suppliers get paid, protecting the owner from liens

They usually travel together: the bid bond gets you to the table, and the performance and payment bonds are issued when you win the contract.

Underwriting for contract bonds looks at your financials, experience, and capacity — sureties want to know you can actually complete the work. Building a bonding relationship before you need it is one of the smartest moves a growing contractor can make, because your bonding capacity effectively caps the size of the public work you can bid.

Bottom Line

Bid, performance, and payment bonds are the price of admission for public construction work. Establish your surety relationship early — bonding capacity is a growth strategy, not just paperwork.

Very often, yes.

Standard surety markets price bonds heavily on personal credit, and some decline applicants with credit challenges outright. But that’s not the end of the road.

There are specialty and high-risk bond programs built exactly for this situation. Expect a higher premium — sometimes a meaningfully higher percentage of the bond amount — and, in some cases, collateral requirements for larger bonds.

This is where an independent agency earns its keep: we can submit your application to multiple surety markets and find the one with the right appetite, instead of letting one carrier’s no become the final answer.

Bottom Line

Credit challenges usually mean a higher rate, not no bond. A declination from one surety is not a declination from the market.

For many license and permit bonds: same day. These are often instant-issue once the application is complete — we can frequently have the bond in your hands the day you call.

Contract bonds take longer because they’re underwritten: the surety reviews your financials, experience, and the specific project. Small contract bonds may take a few days; larger ones require a fuller underwriting file.

The practical advice: never let the bond be the thing that misses a bid deadline. If you’re planning to bid public work, start the surety conversation weeks ahead — once your account is established, subsequent bonds move much faster.

Bottom Line

License bonds are usually same-day. Contract bonds are underwritten and take longer — set up your bonding line before the bid deadline, not during it.

The surety investigates the claim. If it’s valid, the surety pays the obligee up to the bond amount — and then looks to you for reimbursement under the indemnity agreement you signed when the bond was issued.

That’s the crucial difference from insurance: a paid bond claim is effectively a loan you must repay, not a covered loss.

Bond claims also follow you. They make future bonding harder and more expensive, and for contractors they can jeopardize municipal registrations.

The best claim strategy is prevention: communicate early when a project hits trouble, document your work, and call us at the first sign of a dispute — sureties resolve many issues before they become formal claims.

Bottom Line

A bond claim gets the obligee paid — then the bill comes to you, along with harder bonding terms in the future. Involve us early when a dispute is brewing.

If your employees work inside customers’ homes or businesses, or handle money and property that isn’t yours — it’s worth a serious look.

Fidelity bonds (including janitorial bonds and employee dishonesty coverage) protect against employee theft. They’re commonly carried by:

• Cleaning and janitorial services
• Property managers
• Home care and in-home service businesses
• Businesses whose staff handle client funds or valuables

Many commercial clients require proof of a fidelity bond before they’ll sign a service contract — it’s a trust signal as much as a protection.

Separately, if your business sponsors a retirement plan, federal law generally requires an ERISA fidelity bond for those who handle plan funds. Ask us — it’s inexpensive and frequently overlooked.

Bottom Line

If your people work in other people’s spaces or touch other people’s money, a fidelity bond protects your clients and wins you contracts. And if you sponsor a retirement plan, an ERISA bond likely isn’t optional.