Security Guard Performance Bonds - Surety Bonds by Axcess (2024)

Security Guard Companies often need Performance Bonds. Learn what these bonds are, what they guarantee and how to get one.

What is a Security Guard Performance Bond?

A Security Guard Performance Bond is a type of Contract Surety Bond sometimes referred to as a Service Contract. These bonds guarantee that a company will provide Security services at a specified price, level and length of time, according to a contract.

A security guard performance bond protects the party purchasing Security Guard Services by ensuring that they will not need to pay additional costs to have their contract fulfilled.

What Are the Parties to a Security Guard Performance Bond?

A Security Guard Performance Bond is a three-party agreement. The Security Guard Company providing the guard services is known as the Principal. This is the party providing the bond and agreeing to provide services at a specified price. The Obligee is the party purchasing Security Guard Services and getting the benefit of the Bond. The Surety is the third-party bond company that is guaranteeing that the Security Guard Company performs the obligations under the contract. If the Security Guard Company does not, the Surety may have to step in and make cash available to fulfill the contract.

When are Security Guard Performance Bonds Required?

Security Guard Performance Bonds are often required when guard services are needed on public properties because of The Miller Act and Little Miller Acts. However, any property owner could ask for a Security Guard Performance Bond to protect their contract.

Security Guard Performance Bond Underwriting Considerations

Time

Time is an important factor for underwriting Security Guard Performance Bonds. The longer the contract, the more risk to Security Guard Company and the Surety Bond Company. Labor wages, fuel, insurance costs and most expenses usually increase over time. Therefore, a surety bond company prefers Security contracts of one year or less.

If a Security Contract exceeds one year, surety bond companies often prefer that the contract is renewable at the option of both parties. For example, a surety bond company may write a five-year Security Guard Performance Bond as long as it is a two-year contract with three additional one-year renewals at the option of all parties.

Labor

Security is risking business. In addition to labor costs, the Security Guard company has the risk of being able to recruit and maintain security guards. The Surety Bond Company will want to make sure the Security Guard Company has adequate staff to complete any contract before writing a Security Guard Performance Bond. If they have to recruit new guards to complete the contract, there is a risk that those guards will cost more than they estimated to fulfill the contract.

Proper Insurance Coverage

Insurance Claims against Security Guard Companies are common. The Surety Bond Company will want to make sure that the Security Company has adequate insurance coverage to defend themselves against claims and pay them if necessary. This is important to bond companies because an uncovered claim could have a devastating effect on the Security Company’s balance sheet, which could affect their ability to complete a bonded contract.

Financial Strength

A very important part to writing Security Guard Performance Bonds is a Guard Company’s financial strength. A surety bond company will want to make sure that the Security Company has adequate cash, working capital and net worth to fulfill the contract obligations along with their non-bonded obligations as well.

Experience

Experience is also important to underwriting Security Guard Performance Bonds. The Surety Bond Company will want to see that the Security Company has successfully completed contracts of similar size and scope in the past. Larger projects present more risk and surety bond companies are usually reluctant to bond Security contracts more than twice as large as what a Security Company has previously completed.

What Does a Security Guard Performance Bond Cost?

A Security Guard Performance Bond generally costs between 0.5% – 3% of the bonded contract amount. The cost depends on the financial strength of the Security Guard Company and the bond company’s filed rates.

However, unlike many other types of Performance Bonds, a Security Guard Performance Bond Premium is usually due every year that the contract is in force. For example, a three-year Security Contract will have a bond premium due upfront and on each of the two following years. Learn more about Performance Bond Costs here.

Other Security Surety Bonds May Be Needed

Security Guard Performance Bonds guarantee the completion of a specific contract. Usually, Security Guard Companies will need other surety bonds to operate such as a Security Guard License Bond. Security Guards also may need Third-Party Theft Fidelity Bonds.

Security Guard License Bond

A Security Guard License Bond is required by many Federal, state and municipalities to maintain a Security Guard License. These bonds guarantee that a Security Guard or Guard Company uphold the laws and statutes associated with their license. If the Guard or Guard Company act outside of the rules of their license, a claim can be made against the bond.

Unlike Security Guard Performance Bonds, these license bonds usually require only a credit check to obtain them. They are low cost and easy to get.

Fidelity Bond for Security Companies

Security guards are often at a customer’s place of business or home. The nature of their business often gives them access to valuable customer property. For this reason, security guard companies almost always need Fidelity Bonds. Specifically, guard companies need fidelity bonds with third-party coverage. This type of coverage protects the security company from theft of customer property by their employees.

On the other hand, first-party coverage protects the security company from theft of their own property by company employees. While first-party theft is a good idea for security companies, third-party theft is usually required by contract.

The underwriting and cost of fidelity bonds for security companies will depend on the number of employees and the type of assets they are guarding.

Indemnity is Required for Surety Bonds

Security Guard Companies should be aware that Security Guard Performance Bonds and License Bonds are written on the Principle of Indemnity. That means that if the surety bond company pays a valid claim, they will seek reimbursem*nt for the loss from the Security Company and any indemnitors. These bonds ARE NOT INSURANCE. Security Guard companies can read more about indemnity here.

Summary

Security Guard Performance Bonds are required on many Public and Private projects. They are easy to obtain for most Security Guard Companies. Contact Axcess Surety for all your Security Guard Surety Bond needs. Security Companies may also visit our Surety Bonds Page for more information on Surety Bonds.

Frequently Asked Questions

What is a Bonded Security Guard?

The phrase bonded security guard is usually referring to a security guard that has a third-party fidelity bond protecting from the theft of customer property. This is important as security guards are often unsupervised and asked to guard over valuable assets.

Does a Security Guard Need to be Bonded?

A security guard almost always needs a Fidelity Bond that protects against theft. Most contracts require these bonds for guard. Guards performing government work may need a Security Guard Performance Bond to guarantee their contract. Some private works requires this as well.

What is a Security Bond?

It is actually a surety bond for a security company. There are different types of surety bonds for security companies. License Bonds may be needed to operate in a state. Fidelity Bonds protect against theft by the security company and performance bonds guarantee that the security company will uphold the contract.

How Do I Become a Bonded Security Guard?

Once you are licensed or employed, simply purchase a Fidelity Bond that provides the adequate coverage, and you will be a “bonded security guard”.