What exactly is a surety bond?
A bond in layman’s terms is a way to secure a debt.
In its simplest form, a surety bond is a written agreement to guarantee compliance, payment, or performance of an act. Surety bonds require a three-party agreement. The three parties in a surety agreement are:
- Principal – the party that purchases the bond and undertakes the obligation to perform the act as promised
- Surety – the insurance company that guarantees (financially) that the obligation will be performed. If the Principal fails to perform the act as promised, the surety is liable for the losses and will make the payment to the obligee.
- Obligee – the party who requires and receives the security of the surety bond. Most times, the obligee is a corporation, local municipality, state, or federal government organization.
In the insurance world a lot of times you will see bonds requested in the following ways:
A surety bond is a contract between three parties. The person who is the recipient of an obligation, the primary party who will perform the contractual obligation, and the person who assures the obligation will be done.
A performance bond, also known as a contract bond, is a type of surety bond which guarantees that a job will be completed in accordance with the conditions set forth in the contract for that job.
License Bonds and Permit Bonds
These types of bonds function as a guarantee to a government entity that a company will comply with a statute, state law, ordinance, etc.
Some examples are but not limited to:
- Contractors License Bonds
- Tax Bond
- Environmental Bonds
- Broker’s Bonds
- Motor Vehicle Dealer Bonds
- ERISA Bonds
Our job as an independent insurance provider is to help you navigate a cumbersome system in finding the best fit for your bond requirements. We can help you find your bond needs, provide you with your bond, and help you get it to the party requesting.