Wondering what is a surety bond? If your answer is yes, then I am here to help you out. A surety bond is one of the common terms that we often get to hear. However, there are not so many people who are well aware of what is surety bond why one should use it.
But not to worry, as I will be answering all these questions in this article. Sounds interesting?
So let’s just head into the topic without wasting much of the time:
What is a Surety Bond?
A surety bond is basically a sort of contract or a bond that is established between three parties. These parties are the principal or you, the surety or the company, which will make the bond happen the oblige who is requiring the bond. And a surety bond basically financially guarantees to an obligee that the principal will act in accordance with the terms established by the bond.
How Do Surety Bonds Work?
Now the question is, how do surety bonds work? To make it simple for you, a surety bond makes sure that some specific tasks are fulfilled, as stated in the bond. This is achieved by bringing three parties together in a mutual, legally binding contract.
The principal is considered as the individual or business that purchases the bond to guarantee future work performance. Then there is the oblige who is the entity that requires the bond. Obligees are basically the government agencies who are working to regulate industries to reduce the likelihood of financial loss.
And finally, there is the surety, which is an insurance company that backs the bond. The surety provides a line of credit. In case the principal fails to fulfill the task. Also, the obligee can make a claim to recover losses if the principal fails to fulfill the stated tasks.
If the claim is valid, then the insurance company will pay the amount to the oblige. Also, the payment cannot exceed the bond amount. The underwriters will then expect the principal to reimburse them for any claims paid.
Which Surety Bond Do You Need?
The next question is, which surety bond you need?
Well, every business is different. Hence, not every business needs the same kind of surety bond. So to fulfill the requirements of all the business, there are different types of surety bonds available out there. Basically, there are three types of bonds that we get to see. And these types are the:
License and permit bonds:
These types of bonds are required for various professionals. So they can work and operate legally. Such as auto dealers, licensed contractors freight brokers, and a few more are some examples of professionals required to secure a license or permit bond.
Next, there are the Contractor bonds. The individuals or businesses working on public construction projects are likely required to obtain a contractor bond.
Finally, there are the Court bonds. Court bonds are required by courts for a variety of purchases. Such as the probate or judicial bonds.
However, to figure out what kind of surety bond you need for your business, you must have a chat with a firm that offers surety bonds.
So that was all for your question that says what is a surety bond. However, in case if you need to get done with surety bond services. Then I would suggest you to have a look at the bondsexpress.com. They can help you with all your surety bond needs at an affordable price. Also, if you have any more questions to ask, then do feel free to comment below.