[pods name=”amplispot_custom_setting_page” id=”43″ field=”name_of_the_company”] helps you choose from a variety of personal insurance and business insurance solutions.
Surety Bonds provided by [pods name="amplispot_custom_setting_page" id="43" field="name_of_the_company"] .
To run your business, you need guarantees for contracts and other financial obligations. A surety bond is a promise to be liable for the debt, default, or failure of another. It is a three-party contract by which one party (the surety) guarantees the performance or obligations of a second party (the principal) to a third party (the obligee).
Type of Surety Bonds
The surety bond provides a guarantee to the obligee that the principal will conduct themselves per the terms outlined in the surety bond.
Surety bonds are legally binding contracts that ensure obligations will be met between three parties:
- The principal: whoever needs the bond
- The obligee: the one requiring the bond
- The surety: the insurance company guaranteeing the principal can fulfill the obligation
Type of Surety Bonds
There are two main categories of surety bond: Contract Bonds and Commercial Bonds. Contract bonds guarantee a specific contract. Examples include Performance Bonds, Bid Bonds, Supply bonds, Maintenance Bonds and Subdivision Bonds. Commercial Bonds guarantee per the terms of the bond form.
Functions of Bonds
Contract surety bonds perform the following functions:
- Guarantee that the bonded project will be completed according to the terms of the contract and at the determined contract price;
- Guarantee that the laborers, suppliers, and subcontractors will be paid even if the contractor defaults and can result in lower prices and expedited deliveries;
- Smooth the transition from construction to permanent financing by eliminating liens;
- Reduce the possibility of a contractor diverting funds from the project;
- Provide an intermediary – the surety – to whom the owner can air complaints and grievances;
- Lower the cost of construction in some cases by facilitating the use of competitive bids.
When Do You Need a Surety Bond?
Surety bonds are typically required for contractors who seek to work on government contracts. They are also required for persons and companies that are licensed by a governmental entity. Even when not compulsory, surety bonds make sense when a contract requires performance, because they help compensate obligees when principals fail to meet their contractual obligations. They do not make sense if the amount of possible damages is negligible.
Talk to us to know more.