Surety Bond Claims – A Comprehensive Guide For Prevention

How to protect yourself and avoid a Surety Bond Claim

If you operate a business within Canada, you will most likely need to familiarize yourself with surety bonds. These bonds are a necessity and you will be unable to offer your services to the public, until you’ve acquired the right bonds. Once you’ve done this and have entered into a bond contract, you’ll want to do your best to satisfy the client. If you do not, you may wind up on the receiving end of a bond claim. Below, you’ll learn all about surety bond claims and will find tips for avoiding them.Construction surety claim

Repercussions Of Claims

If you speak with a Canadian company, which owns surety bonds, they’ll tell you that it is best to avoid claims. This is the case, because bond claims are not only unpredictable, but also they could be devastating to your business. Once the claim has been made, the situation will be out of your hands. The surety will take on the responsibility of overseeing the dispute and declaring a winner. Unfortunately, if you happen to lose, you’re going to be required to forfeit the entire bond amount. This could very well result in the bankruptcy of a small business.

The good news is that there are ways to diminish the potential for claims. Tips for doing so will be provided below.

Work With The Client

Now, you can see that your best course of action is to avoid the surety bond claim at all costs. In order to try and achieve this goal, it is essential to keep the client in the know and try to satisfy them every step of the way. Remember that the client will always have preferences, desires and expectations. Before beginning the work, you should learn about these things and make sure you try to fulfill them to the best of your ability. Never deviate from the client’s preferences you may wind up in trouble.

Work Rapidly

One thing to remember is that the client will want to get the project completed as quickly as possible. It is in your best interest to do so. Of course, you should never rush the process. Make sure you keep the client aware of the progress, by providing them with updates and work on hand documents. This will give them reassurance that progress is being made and that you’re right on schedule to get the job done on time.

Open Communication

Once a contract is initiated between the construction contractor and project owner, the project will begin, by a specified date written in the terms. A completion date is also specified in the terms of the contract, which open communication for it comes to making a dealmeans that the contractor and all other parties involved will need to work diligently to fulfill it. In the meantime, everything is going as planned, but all of a sudden, a malfunctioning crane becomes a major issue.

The contractor will need to oversee the repairs and make sure that it is completed as soon as possible. The longer it takes to get the crane repaired, the longer the project is delayed. Not only will this incident put you at risk of not meeting the deadline, it may end up costing you several thousand dollars. This may compromise the contract, if you did not plan ahead, by having some extra money put aside for emergencies.

If at any time, the principal begins to feel the brunt of the damage, caused by the malfunctioning crane it may be a good time to start communicating with the project owner. Keeping an open door of communication throughout the project will ensure a positive outcome.


Claims can be devastating and it is best to avoid them at all costs. With this in mind, you should take a proactive stance towards claims. Try to prevent them from escalating and always do your best to stop the surety from getting involved. This will decrease the potential for unexpected losses.

Understanding The Surety Bond – A Complete Beginner’s Guide

Let’s Begin 🙂

There are thousands of Canadians who will have to learn about surety bonds at some point or another. Bonds are utilized for a large number of different purposes and in an array of different situations. Although many do not know it, you do not need to run a business, in order to need a bond. So what precisely is surety bonding and when will it be a necessity? Within this guide, you’ll be able to learn all about Canadian surety bonds.


In order to fully understand the bond, you should take the time to analyze its definition. The surety is a promise and not considered a type of insurance. Within the bond, the surety agrees to make amends to a second party, if the principal is unable to fulfill their duties.

Understanding The 3 Parties

In surety, there are three parties. Each party is given a name and they include surety, obligee and principal. Below, you’ll find a breakdown of each.

  • Surety – The surety is the group or company, which has issued the surety. They are responsible for handling disputes.
  • Obligee – The surety bond provides protection to the obligee. If the principal is unable to satisfy the initially contractual standards, the obligee will be able to file a complaint with the surety to recover damages.
  • Principal – The principal is required to get the bond. They’ll pay a specific amount of money to acquire the bond and will agree to fulfill their duties according to the contract.

When Is It Used?

Although many people do not know it, surety bonds are widely used throughout the country of Canada. It is true that construction bonds, such as bid bonds and performance bonds, are most common, but the list continues on and on. In fact, the mass majority of professionals within Canada will be required to obtain a license bond, before they’ll be able to acquire their professional license. Also, bonds are commonly used when a company or entity serves the public. And finally, courts often require surety bonds for various reasons.

Construction Bonds

Canadian’s construction industry is currently booming. The surety companies, which offer construction bonds, have seen an increase in visitors as well. This is the case, because contractors almost always need a bond, before they can even secure the rights to a job. In order for contractors to place their bid on a job, they’ll need to secure a bid bond which they can get from an insurance company such as RBC. Once they’ve managed to secure the job, they’ll most likely be required to obtain other bonds, such as performance bonds and supply bonds. The performance bond protects the project owner, while the supply bond is used to protect the companies, which provide materials to the project.

License Bond

If you wish to obtain your professional license, it is most certain you’ll be required to obtain a license bond. The Canadian government has put these guidelines in place, in order to better protect the government and prevent untrustworthy individuals from pretending to be professionals. An array of different professionals will need bonds, such as appraisal companies, auctioneers, automotive deals, and even collection agencies.


Once you’ve better familiarized yourself with surety bonds, you’ll find that they’re not all that difficult or frightening. However, they are diverse and used for many different purposes. Although you may not need a bond now, it is still a good idea to learn about them, because you may be required to do so in the future.