Surety bonds are a type of insurance policy that typically involves three different parties in their transactions. In this article, we will be discussing some of the facts that will come as routine information to you by the agents of the surety bond insurance companies.
What Is A Surety Bond Insurance Policy? – A surety bond is an agreement that is drawn between three different parties – the surety, the principal and the obligee. The surety, in this case, is the insurance company that pays the obligations to the to oblige on behalf of the principal. To most people, a surety bond will appear as a means of transferring the element of risk. These bonds are planned to provide protection top private interests and also to public interests against the actions conducted by a third party. Simply a surety bond is a bond where a third party makes a payment to the second party on behalf of the first party.
In most cases, it has been seen that surety bonds are applicable across the construction industry. Typically when a project owner begins his project in liaison with the general contractor he requires this type of a surety bond. Here the general contractor will be required to purchase this surety contract. Now, this is a bond that protects the project owner. If the general contractor fails, the project owner can claim against the purchased surety bond. Here the surety bond is paid by the insurance company to the project owner on behalf of the general contractor. Once the damages the general contractor can pay back the insurance company.
Types Of Bonds – Surety bonds can be of various types that can come from regular surety bond insurance companies. They are the name of the following types
- Contract Surety Bond – This is a type of insurance bond that is subjected to the contractors.
- Commercial Surety Bond – This is a type of bond that is often availed by the government departments.
- Fidelity Surety Bond – This is a bond that offers protection to a company against the actions of infidelity of any employee who handles the cash of the company.
- Court Surety Bond – This is a type of surety bond that is often availed by the attorneys and the lawyers.
Variable Details – Surety bonds happen to vary in terms of the amount of the principle that needs to be paid and other rules and regulations. The differentiation in these terms and conditions varies due to the nature of the project, its total valuation, the risk involved and the scale of implementation. The rules and the regulations will also vary from state to state. At the time of applying for the surety bond insurance companies as your payer or surety, you must make an in-depth investigation into the condition and the reputation of the company.
It is advisable that you take the help or assistance of a person who has already applied for such insurance. Or you can also take the help of a professional who has experience into the concerned domain.