What is a Surety Bond?
Definition: sur•e•ty bond
A surety bond is a contractual agreement between a project owner or business guaranteeing that the project will be completed or business regulations will be followed.
How do surety bonds work?
To put it simply, they guarantee that specific tasks are fulfilled. This is achieved by bringing three parties together in a mutual, legally binding contract.
- The principal is the individual or business that purchases the bond to guarantee future work performance.
- The obligee is the entity that requires the bond. Obligees are typically government agencies working to regulate industries and reduce the likelihood of financial loss.
- The surety is the insurance company that backs the bond. The surety provides a line of credit in case the principal fails to fulfill the task.
The obligee can make a claim to recover losses if the principal does fail to fulfill the task. If the claim is valid, the insurance company will pay reparation that cannot exceed the bond amount. The underwriters will then expect the principal to reimburse them for any claims paid.
I need surety insurance?
People often wonder what surety bonds are after they’ve been told they need to buy one.
- Most people need license and permit bonds before they can get their business licenses.
- Construction professionals often need contract bonds before they can work on publicly funded projects.
- Some business owners choose to buy business service bonds to protect clients against employee theft.
These are just a few reasons why you might be looking for information on surety insurance. For more information on a specific bond type, browse our site, or contact a surety specialist.
How can I apply?
SuretyBonds.com offers quick, easy and accurate bonding services. Unlike other bond companies, SuretyBonds.com can approve 99% of applicants regardless of bad credit or other financial problems. All you have to do is submit an application. Then your account manager will shop your application around with our exclusive underwriting markets. You’ll receive the lowest available rate within one business day of your application. Once you approve the rate and pay your premium, your bond insurance will be legally executed.Source: www.suretybonds.com