License and Permit Bonds

License and Permit (L&P) bonds are the most common type of commercial surety bonds. L&P bond requirements are derived from statutes, codes, and ordinances, which are enacted by regulatory bodies at various levels. Governmental authorities require a licensee or permitee to post a bond as a condition of the business licensing or permit process.

L&P bonds guarantee the bond principal will perform according to the applicable statute, code or ordinance. Laws dictate the bond details, like the amount of the bond, conditions for when the bond is needed, and the guarantees the bond provides. For example, L&P bonds might guarantee the Principal will pay taxes or fines, or that the Principal will perform or not perform certain actions.

FOUR CLASSES OF L&P BONDS

  • Regulatory/Compliance
  • Public Safety
  • Public Protection
  • Financial Guarantee

To see what bond types are required in your state or municipality, visit the Merchants Bonding Company Hub™.

UNDERWRITING

The underwriting requirements for L&P bonds are largely determined by what the guarantees are. Most compliance bonds at $25,000 and under are instant issue bonds. To underwrite financial guarantee bonds, we typically require a credit check and financial statements.

HOW DO I GET A SURETY BOND?

Surety bonds are issued by Merchants Bonding Company (Mutual) through insurance agents. Contact your local insurance agent or use our Find an Agent tool. They will guide you through the process, informing you of what documents and information are needed by the surety (Merchants Bonding Company (Mutual)) to underwrite your bond.

WHAT IS A SURETY BOND?

A surety bond is a three-party agreement that ensures the fulfillment of a commitment or contract. For instance, the surety (Merchants Bonding Company (Mutual)) may provide a surety bond to a construction company (the principal) which is required by the state (the obligee), ensuring the construction company will perform the duties as outlined in the contract. In bonding the construction company, Merchants assumes the risk should the company default or not fulfill their contract. A surety bond is different from traditional insurance in that the principal is obligated to pay back the surety company on any claims paid out.

All information provided is subject to change.