What Is A Surety Bond?
What Does A Surety Bond Do?
A surety bond guarantees that a financial obligation will be fulfilled.
Who Benefits From A Surety Bond?
The party that purchased the bond, called the “principal” and the party that requires and receives the bond, called the “obligee” share the benefits of having a financially strong third party, the “Surety Company”.
Who Can Be Bonded Under A Surety Bond?
Any Individual, Partnership or Corporation that meets the requirements of the surety company can be bonded, and if bonded the party is known as the “principal” under the bond.
Is A Surety Bond Insurance?
A surety bond is an extension of credit in the form of a guarantee. A surety bond is never considered insurance.
Who Can Make Claim Under A Surety Bond?
What Would Create A Claim Under A Surety Bond?
The principal’s inability to fulfill his obligation would create a claim against a surety.
What Happens If A Surety Company Has To Pay A Claim?
A “principal” is legally obligated to reimburse the surety company for any loss and expense incurred by the surety. The principal’s obligation to the surety can therefore be greater than the original obligation to the “obligee”. The surety has the same recourse against the principals any other creditor would have in recovering their loss.
Can I Buy A Bond From An Agent In A State Other Than The State I Live In Or Need A Bond In?
You are free to purchase a bond from any licensed agent in the US as long as he is licensed in the state in question.
How Can I Tell If I’m Being Quoted A Fair Price For My Bond?
Prices can vary substantially. Depending on a surety company’s claim experience for a certain bond or the surety’s desirability for the type of bond you are requesting. The “Fees” an agent charges for a bond can also have a substantial effect on the price. Most bonds can be obtained without paying a fee to an agent. If you have good credit and find a bond price that sounds substantially higher than prices you see posted on ours or similar websites, get more than one quote to make sure you’re being offered a fair price. If you cannot qualify due to credit or other factors for a standard priced bond, it maybe necessary to pay more. Keep in mind an agent’s fee may be added in varying amounts and could make a huge difference on the price. Again check with more than 1 agency to find the best price. Agencies provide “Free Quotes” Always ask how much the fee is.
How Can I Find Out If I Qualify For The Bond I Need?
Since bonds are like bank loans that in theory never get used, you must qualify financially. In most cases a credit check will be needed and a personal financial statement must be completed. If you own an existing business, a business financial statement should also be submitted. A signed application must be prepared giving authorization for ordering a credit report.
What Does A Surety Bond Company Look For To See If I Am Able To Get Bonded?
Your personal credit history is the chief determining factor of a bond’s availability and price. Although other aspects of your financial picture play an important role, depending on the type bond, a surety company may look at how long you’ve been in business, your liquid assets (such as available funds in a bank account) and property you own.
My Credit Is Not Very Good. What Are My Options?
Bonds are available for most bad credit situations. However you must expect to make certain concessions. Higher cost is one and you may also be required to post a security deposit known as “collateral”. In some cases a “Co-signer” may be acceptable. A co-signer would accept the responsibility of indemnifying the bond if it becomes necessary to do so.
Anything of value pledged with the surety to secure it against loss by reason of
default of the principal.
COLLATERAL: Anything of value pledged with the surety to secure it against loss by reason of default of the principal.
COSIGNER: A co-signer would accept the responsibility of indemnifying the bond if it becomes necessary to do so.
OBLIGEE: The party in whose favor a bond runs; the party protected by the bond against loss. An obligee may be a person, firm, corporation, government, or an agency of a government. This is who you have to file your bond with, or the organization who is requiring you to get the bond.
PRINCIPAL: The one who is primarily bound on a bond furnished by a surety company.
SURETY BOND: An agreement providing for monetary compensation should there be a failure to perform specified acts within a stated period.
SURETY COMPANY: A company which provides an agreement providing for monetary compensation should there be a failure to perform specified acts within a stated period.