Surety Bonds - Frequently Asked

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A surety bond is a three-party agreement that guarantees the performance of an obligation. The three parties involved are the principal (the party who needs the bond), the obligee (the party requiring the bond), and the surety (the company issuing the bond). 

 Surety bonds are often required to ensure that obligations such as contract performance, payment of subcontractors, or adherence to regulations are met. They provide financial security and build trust with clients, vendors, and regulators. 

There are several types of surety bonds, including:

• Contract Bonds: Guarantee the fulfillment of contractual obligations.
  • Bid Bonds: Ensure that the bidder will enter into the contract if awarded.
  • Performance Bonds: Ensure the project is completed according to the contract terms.
  • Payment Bonds: Guarantee that subcontractors and suppliers will be paid.
• Commercial Bonds: Required by law for certain businesses and professionals.
  • License and Permit Bonds: Required for obtaining a business license or permit.
  • Court Bonds: Required in legal proceedings, such as appeal bonds or probate bonds.
• Fidelity Bonds: Protect against employee dishonesty or fraud.
  • Employee Theft Bonds: Cover losses due to employee theft or fraud.

Qualification for a surety bond typically involves:

• Financial Assessment: Review of your business’s financial statements to ensure stability.
• Credit Check: Evaluation of your credit history.
• Experience Review: Assessment of your business experience and track record in the industry.

The cost of a surety bond, known as the premium, is typically a percentage of the bond amount. This percentage varies based on factors such as the type of bond, the amount of the bond, the principal’s creditworthiness, and the financial strength of the business. 

The time it takes to obtain a surety bond can vary. Simple bonds can be issued within a few hours or days, while more complex bonds, particularly those requiring detailed financial reviews, can take several weeks. 

If a claim is made on your surety bond, the surety will investigate the claim. If the claim is valid, the surety will pay the obligee up to the bond amount. As the principal, you are responsible for reimbursing the surety for any claims paid, including legal fees and other costs. 

While good credit is important for obtaining a surety bond, it is still possible to get bonded with bad credit. However, the premium may be higher, and additional collateral or guarantees might be required. 

Surety bonds and insurance both provide financial protection, but they serve different purposes. Surety bonds guarantee the performance of obligations and protect the obligee, while insurance protects the policyholder from financial loss due to specific risks. 

Surety bonds typically have a set term and need to be renewed before expiration. The renewal process involves re-evaluating your financial situation and updating any necessary information. Our team can assist you with the renewal process to ensure continuous coverage. 

To get started, contact our team of surety bond experts. We will guide you through the application process, help you gather the necessary documentation, and work with you to secure the bond that meets your needs. 

"Frequently asked questions" are a listing of most commonly experienced questions and  the simplified versions of the most typical answers.  This should not be construed as legal advice.  Please refer to your policy for actual language, terms and conditions.