The function of a bonding company

When a company is bonded by a bonding company, it gives the bonded firm credibility. The bonding acts as an insurance policy for the customer. Bonding can be a performance guarantee, and it can protect a recipient of services against losses created by another party, such as theft or property damage. That function is what makes a bonding company different than an insurance agency: the bonding company protects the insured party’s customers receiving the services, not the insured, as notes. Thus, a bonded company can be a more desirable option to customers, as they know they have recourse to get reimbursed in the event of damage by the company providing the services.

A general contractor is a good example of a firm that could employ the services of a bonding company. For starters, the contractor might want to be covered in the event of customer claims arising from their employees’ work. Contractors might also have to be bonded in the event they cannot complete the work they have agreed to do.

To be bonded, a firm must be vetted by the bonding company. At issue is the firm’s reliability to complete the work it wishes to do. A company’s financial health will be among the factors assessed before the decision to bond is made.

With proper bonding in place via a bonding company, a firm is covered for the many possibilities traditional insurance may not cover. If you would like more information on the bonding process or would like to know about other strategic insurance solutions, contact Plexus at 847.307.6100 (Chicago), 972-770-5010 (Dallas) or 405-241-9462 (Oklahoma City). You can also contact Plexus’s team of insurance professionals via the Web.


Johnson, Sandi. “What does a Bonding Company do?”, September 8, 2015. Small Business Encyclopedia: Bonding.

U.S. Small Business Administration, Surety Bonds: Frequently Asked Questions