Surety bonds are described as a type of contract that occurs between 3 parties. This includes the Principal which is “you”, the Surety which is “us” and an Obligee “the entity that requires this bond”, whereby this surety will financially guarantee to the Obligee that the Principal will be acting in accordance associated with terms that have been established by this bond.
What Type Of Bond Do You Need?
To date there are more than 50,000 bonds available in the U.S. The regulations, amount and bond requirements are generally put into place at a state level.
How Do The Surety Bonds Work
To simplify how these bonds work is that they are a guarantee that a specified task will be fulfilled. This occurs in the way of bringing the 3 parties together in a legal and mutually binding contract. Further details are on www.hcgms.org as to how this works.
- The Principal is a business or individual that buys this bond in order to put in place a guarantee for work into the future
- The Obligee is an entity that requires these bonds. The Obligees are generally government agencies that work on regulating the various industries to decrease the risks of financial losses.
- The Surety is insurance companies which back these bonds. The Surety will offer a credit line when the principal has failed to complete or fulfill a task that was required from them.
Obligees are allowed to make claims in order to recover any losses when a Principal has failed to fulfill the tasks expected of them. When a claim has been approved as valid, the insurance business will pay out reparation which is not allowed to exceed the original bond amount. Underwriters will expect that the Principal will reimburse the company for claims paid out.
The Types Of Surety Bonds That Exist
There is currently a vast amount of surety bond types, similar to that there are various obligation types that people are able to make to each other. The surety bonds are in most cases broken down into 2 categories: The Contract Surety Bonding and Commercial surety bonding.
Commercial Bonding will be inclusive of many types of surety bonds. Here are a few of the common surety category types with examples for each bond:
1.License and Permit Surety Bonds
- Auto Dealer bonds
- Insurance Agent bonds
- Mortgage Broker bonds
2.Fidelity Surety Bonds
- ERISA bonds
- Employee Dishonesty bonds
- Janitorial bonds
3.Fiduciary Surety Bonds
- Trustee bonds
- Guardian bonds
- Administrator bonds
4.Public Official Surety Bonds
- Tax Collector bonds
- Notary bonds
- County Clerk bonds
- Indemnity to Sheriff bonds
- Court Costs bonds
- Attachment bonds
Construction bonding or Contract bonding is a guarantee that the developer or contractor will complete a construction project in full for which the developer or contractor has bid according to the specification and will go about paying all the suppliers, subcontractors and laborers. These types of surety bonds will include:
- Site Improvement bonds
- Supply bonds
- Subdivision bonds
- Performance bonds
- Payment bonds
- Bid bonds
There are various Surety Bond brokers across the U.S. that provide fast and simple solutions for all the types of Surety Bonds in all fifty states.