In the Newspaper Industry a Surety Bond is merely the shifting of financial risk from an Independent Contractor to an insurance or surety company in return for a small non-refundable premium.
In its simplest form, a surety or insurance company issues credit to an Independent Contractor. In this manner, anyone who is qualified to become an Independent Contractor can easily do so without a large out of pocket cash deposit. Instead, the surety company charges a premium for a specified liability amount.
By entering into this type of arrangement, the surety company accepts the financial obligation agreed to by the Independent Contractor in the delivery agreement to pay all financial obligations if the Independent Contractor fails to do so.
Once the surety company accepts the financial obligation of the Independent Contractor, then no excuses for late payments, balances carried forward, or the entire bill not being paid are acceptable.
A Surety Bond is used to reimburse a Newspaper or distribution company for financial losses in the event an Independent Contractor fails to pay monetary obligations required in the Contract or in the event of a Breach of Contract. Don't believe just because your Newspaper has a large percentage of pay to the office or paid in advance subscribers that all financial liability or risk has been eliminated.
Today's Contracts contain "Liquidated Damages" clauses which allow either party to recover expenses should the other party breach any portion of the Contract.
Without the benefit of a Surety Bond, Newspapers are unable to recover the expenses associated with Liquidated Damages such as the enormous costs associated with office delivering of a dropped Route.