History Of The Surety Bond

Where did it all start

Surety bonds are an important part of doing business these days. In fact, in some industries, a surety bond will be required, before a business entity can begin operation.  Unfortunately, many people are unfamiliar with bonds and Surety buildingwhat they do. If you plan on opening up your own business, it is important that you understand a little bit about the history of surety bonds.

What Is A Surety Bond?

While there is an unlimited array of surety bonds, they all work around the premises. A Surety Bond is classified as a contract that involves three parties. These three parties would include the surety, the principal, and the obligee.

  • The surety – this is the underwriter that issues the bond and ensures the obligee that the principal will fulfill the terms of the contractual agreement.
  • The principal – is the contractor or business that is going to be performing the work and financing the project.
  • The obligee – is basically the client or project owner. This individual will be responsible for bidding out the project and hiring the contractor.

The Existence Of Surety Bonds

Surety bonds have been around for quite a long time. However, they used to be known as a suretyship, but they have always existed to protect the client or consumer. Research shows that the first record of a suretyship was discovered on a Mesopotamian tablet that was written around 2750 BC.

surety bonding history

The first corporate surety was a London-based company developed some time in 1840 and by 1865 the whole concept made its way to America. However, the business failed, but in 1894 congress passed what was known as the Heard Act. This Act required contractors to obtain a surety bond on all projects that were funded by federal agencies.

Surety And Insurance

Oftentimes, people confuse surety bonds with an insurance policy, because they both protect consumers in some sense. However, they are not quite the same thing. For instance, a surety bond is not designed to protect the business owner, in the same way that insurance policy would. If a client files a claim on a surety bond and is awarded the payout, it is possible that the principal may be forced to repay the underwriter.

The License Surety Bond

What It Is And Who Needs One?

If you have a desire to operate your own business or serve the public in any way, you’ll most likely encounter the need to acquire a surety bond. There are thousands of professionals within Canada and these individuals were most likely required to do the same. Before you begin offering your services to the public, it is essential to analyze the information below.

The License Bond

Within Canada, a large number of businesses and professionals are required by law to obtain a license surety bond, business license bondingbefore they can legally obtain their license. There are a few exceptions, so you’ll need to analyze the specific statutes, which govern your profession. Also, the laws may deviate to some degree from province to province.

Why Is It Required?

Initially, it may seem like the requirement of the surety bond is nothing more than a money grab. This isn’t actually the case. In fact, there are a few good reasons for the requirement. First and foremost, the requirement of the bond helps to protect the Canadian public at large. The bond guarantees that a business or professional will conduct themselves according to the Canadian federal laws, as well as any provincial laws that may govern their line of work.

Secondly, the requirement is to ensure that only reliable, worthwhile individuals are able to serve the public.

How To Get The License Bond

If you’ve hit a speed bump and need to acquire a license bond from a Canadian Surety Bonding Company, you’ll need to learn how to move ahead and call a brokerage like SuretyKings. The good news is that the mass majority of Canadian surety providers have simplified the process, so that you’ll be able to complete the application online. Before doing so however, it is often wise to shop around by obtaining and comparing quotes. Most companies will be able to provide you with a quote within 24 hours, so you can get your license bond and licensure rapidly.

Different Types Of License Bonds

Within Canada, there are thousands of individualistic professionals and unique license bonds to suit them. Below, you’ll find a breakdown of some of the most common.

Motor Vehicle Dealer Bond – If you wish to sell cars within Canada, you’ll need to acquire a motor vehicle dealer license. Within News Brunswick, dealers of new vehicles, used vehicles, wrecker dealers, and motorcycles use this bond. Before you can acquire the license, you will need to obtain and submit a motor vehicle dealer bond.

Collection Agency Bond – There is always some degree of risk, when a company is responsible for dealing with another individual’s money. This is where the collection agency bond enters the picture. The Consumers Protection Act and other statutes have been put in place to require the bond to help decrease the potential for devious behaviors and fraud.

Private Investigator Bond – Those that wish to become private investigators within Canada will be forced to obtain a bond. The bond amount will vary depend on your operational location. Within News Brunswick, the professional will need to post a $5,000 bond.


All in all, the license surety bond is truly an integral aspect of Canadian business. It is there to provide protection to the public and can be used to hold the professional responsible for malicious behavior. To read about how much bonding you need in place, refer to CSLB.