A professional bond, also known as a license or permit bond, is a type of surety bond that certain professionals may be required to obtain as a condition of obtaining or renewing their professional license or permit. These bonds serve as a form of financial protection for clients or the public in case the bonded professional fails to comply with relevant laws, regulations, or ethical standards.
Professionals who may be required to obtain a professional bond include contractors, construction professionals, auto dealers, mortgage brokers, real estate agents, and other licensed professionals. The bond provides financial compensation to individuals who suffer financial losses due to the professional’s failure to fulfill their obligations or adhere to industry standards.
If a claim is filed against the bond, the surety company that issued the bond investigates the claim and, if valid, compensates the claimant up to the bond’s coverage amount. The bonded professional is then responsible for reimbursing the surety company for any amounts paid out on their behalf.
The specific requirements for obtaining a professional bond, including the bond amount and any associated fees, vary depending on the type of profession and the laws and regulations governing that profession in the relevant jurisdiction. Professionals need to understand their bonding requirements and comply with them to maintain their license or permit to practice.