Get FREE Performance Bond Quotes from Surety Companies
Surety bonding didn’t come to the United States until the late 19th century, but the concept has been around for several thousand years. In many situations where a contract between two parties exists, it is vital that the terms of the contract are upheld. Otherwise, a financial loss may be incurred by the party contracting the work to be performed.
A surety company is regulated by their state’s insurance commissioners, just like personal and business insurance providers are. This often leads to the mistake of calling this type of bond surety insurance. A surety bond is not an insurance instrument. Instead, it is a promise to pay one party if another party fails to live up to their contractual obligation. So don’t go asking for a surety bond insurance policy when shopping for this coverage.
Surety Bonds Explained
A surety bond (Wikipedia definition) is used to ensure that a company holds up its contractual obligations. It is a contract between three parties – The principal (obligor) is the person who will perform the contraction obligation. The obligee is the party who is on the receiving end of the contract and the surety is the one who guarantees the principal’s performance.
Simply put, surety bonding guarantees a particular person or company will fulfill their contractual obligations to their client, or the surety bond company will pay the client a specified amount of money should the contract not be fulfilled. Surety bonds are used to demonstrate the credibility of a company so that other companies or individuals will be more inclined to do business with them. They are also a government requirement in order to receive a license or permit to conduct certain types of business.
Surety Bonding Examples
Often times, in order to be hired for a project, or to be able to bid on a contract, a company will need to prove it has lined up a surety bond. In certain industries, this is a common practice and it is just assumed that this coverage will be in place before the start of a contract. A surety company will be the provider of the bond and is the entity that the company needing the coverage will pay a premium to in order to have this coverage. Once the guarantee is in place, the company looking to be awarded the project or contract will then be able to present it, proving that it has the proper backing in place, should it not be able to fulfill its obligation.
This is particularly true in the construction industry, with the following types of construction bonds being commonplace:
- Contractor bonds – A contractors bond is very common in the construction industry, and are most times a requirement in order for a general contractor to get a state license. A contractor surety bond will guarantee that the construction contract will be adhered to. Contractor bonding comes in several different specific forms, with a performance and payment bond being the most common.
- Performance bonds – A construction performance bond guarantees that a contractor will do the work that they are contractually obligated to do. Should the contractor fail to live up to their obligation, the bond will compensate the person having the work done so that they can get the job finished by another party. The performance bond cost will based upon the type of contractor, as well as the amount of guaranteed coverage needed.
- Payment bonds – A payment bond is a type of construction bonding that guarantees that a contractor will pay for the supplies that they purchase for a job, as well as third party services that are required during the construction project. In other words, payment bonds guarantee that the general contractor’s suppliers and sub-contractors will be paid.
- Contractor license bonds – A contractors license bond guarantees that the licensed individual or company performing a construction task will do so in compliance with any local or state laws.
- Bid bonds – A bid bond guarantees that the contractor will actually enter into the contract (do the work) should they be the top bidder on a project
- Maintenance bonds – A maintenance bond simply guarantees that a contractor will perform the contracted maintenance on a facility for the amount of time they are required to do so.
Other examples of commercial surety bonds include dealer bonds required by motor vehicle dealers in order to do business within a certain jurisdiction, and a freight broker surety bond which is required by the federal government in order to operate as a transportation broker. Commercial bonds come in many different varieties, and are often a regulatory requirement in order to be able to conduct business. So what does a surety bond cost and how do you find the best issuer of the type of bond you need?
Surety Bond Companies – Getting The Best Rates
The best way to investigate surety bond rates is to use US Insurance Online, an online aggregator of bond and commercial coverage providers. By filling out one simple, secure form, you will receive FREE, no-obligation quotes for surety bonds. You will quickly hear back from multiple providers so that you can compare quotes and choose which provider is right for you.
Since 1989, US Insurance Online has streamlined the process of finding insurance for over 20 million people. They have the largest online network of national carriers and local agents, which saves you a lot of time when it comes to getting the right coverage. By having providers compete for your business, you can find the best surety bond rates, as well as any commercial coverage your enterprise needs.
It has never been easier to get commercial insurance coverage quotes than it is when your company uses US Insurance Online. Line up the coverage your small business needs today so that it is able to move forward and be awarded the projects and contracts it needs to be successful.
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