top of page

License and Permit Surety Bonds

License and permit bonds might not be the most glamorous topic, but they play an essential role in various industries, ensuring compliance and financial security. In this blog post, we'll delve into what license and permit surety bonds are, how they work, and why they matter.

What are License and Permit Surety Bonds?

License and permit surety bonds are required to obtain a license or permit in many cities, counties, states or other political subdivisions. These bonds serve as a guarantee that the bondholder (the principal) will comply with applicable laws, regulations, and statutes. If the principal fails to meet their obligations, the bond provides financial compensation to the obligee (the entity that requires the bond), up to the bond's specified amount.

How Do They Work?

Let's break down the process:

Requirement: A government agency mandates a license or permit bond as a prerequisite for conducting specific business activities. A common example of this would be a contractor wanting to complete street work for a city and the city requires them to obtain a right of way bond in order to do the job for them.

Application: The principal applies for the bond through a surety bond provider. The provider assesses the principal's financial stability, creditworthiness, and other relevant factors to determine if the applicant qualifies for the bond.

Issuance: Upon approval, the surety bond provider issues the bond to the principal. The bond typically includes details such as the bond amount, the parties involved, and the conditions of the bond.

Compliance: The principal must adhere to the terms outlined in the bond. This may involve fulfilling contractual obligations, adhering to safety regulations, or following industry standards.

Claims Process: If the principal breaches the bond terms, the obligee can file a claim against the bond. The surety investigates the claim and compensates the obligee for valid claims, up to the bond's limit.

Indemnity: Once the surety pays a claim, the principal is responsible for reimbursing the surety for the amount paid. This creates a financial incentive for principals to fulfill their obligations and minimize claims.

Why Are They Important?

License and permit surety bonds serve several critical purposes:

Protecting the Public: These bonds safeguard consumers, clients, and taxpayers from financial harm resulting from the principal's non-compliance, negligence, or misconduct.

Ensuring Compliance: By requiring bonds, government agencies promote adherence to laws, regulations, and industry standards, fostering a safer and more transparent business environment.

Promoting Accountability: Principals are incentivized to fulfill their obligations to avoid financial losses and reputational damage. Bonds hold them accountable for their actions, enhancing trust and credibility.


License and permit surety bonds may seem like bureaucratic requirements, but they play a vital role in maintaining integrity, accountability, and safety across various industries. Whether you're a contractor seeking a construction license or a retailer obtaining a permit, understanding these bonds is essential for compliance and risk management. By fulfilling their obligations and upholding industry standards, principals contribute to a more robust and trustworthy business environment for all stakeholders.

If you find yourself needing a license and permit bond, call Reeder Insurance Agency today! 720 883 1770


Featured Posts
Recent Posts
Search By Tags
Follow Us
  • Facebook Basic Square
  • Twitter Basic Square
  • Google+ Basic Square
bottom of page