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Many counties in Arizona require certain types of contractors and business owners to be bonded before a business license will be granted. In most cases, people take out surety bonds in Arizona to meet their bond requirements. If this is not something you are familiar with or you have never heard of it before, you may have many questions. Here are some of the most frequently asked questions about surety bonds in Arizona. What Are Surety Bonds in Arizona? Surety bonds are similar to insurance. In many fields, your customers are depending on you to either do the work correctly or sell them items that are authentic and real. However, there is a always a risk that the work will not be done correctly or that the item you sold was not authentic or not as represented. In these instances, the consumer needs to be made whole. A surety bond would then pay the party whatever their costs were to be made whole again. This includes paying for any damages that were done because of the work that was incorrectly done or because of any damages the person experienced because of your mistake. What Fields Need Surety Bonds? Every county has their own legal requirements as to who must have surety bonds in Arizona. Therefore, the industries vary from county to county. However, it is very common that almost every type of construction contractor be required to obtain a bond and most resellers, such as pawn shops, art brokers and fine jewelry buyers obtain surety bonds. How Much Will Surety Bond in Arizona Cost Me? Surety bonds are very similar to insurance. As such, there are many factors that can play a role in what your rates will be. The amount of coverage you need, the industry that you are in, how long you have been in business, and how many previous claims you have submitted all play a role in your rates. And just like with insurance coverage, your rates are typically locked in for six to twelve months and after that time, the rate may increase or decrease. Are There Any Alternatives to Surety Bonds? Yes. If the state requires you to be bonded, you have two options. You can either post a bond with the licensing department or take out a surety bond. If the state requires you to have a $100,000 bond, you must come up with $100,000 in cash to post a bond with the licensing department. They hold onto that money indefinitely incase they ever have to pay out claims on your behalf. Unfortunately, this just is not practical for most businesses. Coming up with large amounts of cash and then just having to leave it with the city indefinitely can put a huge strain on a business or simply be impossible. This is why most businesses go with surety bonds, rather than posting their own bond. The advantage to posting your own bond is that you aren't paying a premium for a service that you may never have to use. Who Would I Contact If I Want to Take Out Surety Bonds in Arizona? If you need to take out a surety bond, you will need to find surety bond companies. You can either look online or in the phone book to find companies. Your local licensing department may also be able to refer you to companies who issue and provide surety bonds. Just like when you take out an insurance policy, it is always best to get quotes from multiple companies so that you can find the one that offers the best pricing for your business.
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