A Surety Bond is a three-party agreement between the Principal, the Surety, and the Obligee. It is a written agreement in which the Surety agrees to guarantee the performance and obligations of the Principal to the Obligee. The Principal’s commitments to the Obligee may be to perform a service to certain standards or to comply with some requirement such as licensing or permitting. It is important to understand that the Surety Bond is a credit relationship and NOT an insurance policy.
1) The Principal (Contractor, Business Owner, Fiduciary, etc.)
The party who is to be bonded is called the Principal. The Principal, sometimes referred to as the Obligor, has an obligation to render a service or operate a business that conforms to ethical standards or complete a project to the contracted standards.
2) The Obligee (Project Owner, Government Agency, etc)
The party protected by the Bond against loss is called the Obligee. An Obligee may be a person, a firm, a corporation, or a government body. The Obligee is the party requiring the Principal to obtain a Surety Bond, which is a performance guarantee.
3) The Surety (Carriers and Underwriters, ect)
The party who underwrites the bond (or credit relationship) is called the Surety. The Surety posts the financial performance guarantee on behalf of the Principal in the form of a Surety Bond.
When Contractors are awarded a large project, the project owner usually requires a Contract or Performance Bond. Contract Bonds typically guarantee the contractor’s work quality and that the project will be completed as per the specifications in the contract. They also guarantee the contractor will pay all of the labor and material bills.
Many types of businesses are required by law to have a license or permit to conduct business. In these cases, a bond may be needed to guarantee that the business will comply with federal, state and local government regulations.
The Judicial System often requires that both plaintiffs and defendants to post a bond to guarantee that certain costs and fees be paid as well as for other reasons in conjunction with the litigation process.
A Fidelity Bond is normally used by business owners to guarantee losses caused by the dishonest acts of its employees. In some cases it protects the employees by guaranteeing the honesty of an employer when it comes to managing their 401K accounts.
Surety Bonds are a financial agreement that guarantees the performance of a person or business. We call bonds that cannot be specifically classified in other categories Miscellaneous Bonds.
The Surety Bond Business is all about relationships. We work very hard not only to build and maintain trust with our clients but also with our carriers and underwriters. Strong relationships with all parties to a Surety is critical when it comes to getting difficult bonds done quickly and efficiently.
Unlike most insurance agents who sell surety bonds, we have in-house underwriting authority for most bonds and in many cases we can turn around a bond within 24 hours. Freely issued bonds are completed in just minutes.
Bad credit is no problem. We understand the last few years of difficult economic times have been devastating for both companies and individuals. We have several programs available to assist those with credit challenges get the surety bonds they need!