Commercial Bond

What Does Commercial Bond Mean?

A commercial bond is a type of surety bond designed to guarantee the credibility of business professionals and ensure compliance with the laws governing their industry.

If someone believes they have been wronged by a commercial bondholder who failed to adhere to these laws, they can file a claim with the surety company that issued the bond. In this role, the surety functions similarly to an insurer.

Insuranceopedia Explains Commercial Bond

Commercial bonds function as a form of insurance that protects against losses caused by unqualified business professionals or those who fail to comply with the law.

For instance, if a contractor faces a claim from a client alleging a violation of contracting laws, the surety will pay the claim if it is deemed valid. Contractors are among the professionals most frequently required to carry commercial bonds, and the cost of the bond is usually bundled into their overall general contractor insurance expenses.

Common examples of commercial bonds include license and permit bonds, public official bonds, and probate or other court bonds. Because they overlap with liability and licensing requirements, commercial bonds are one of several types of business insurance that regulated professionals need to carry.