What is an indemnity bond?
An indemnity bond assures the holder of the bond, that they will be duly compensated in case of a possible loss. This bond is an agreement that protects the lender from loss if the borrower defaults on a legally binding loan. If the principal fails to fulfill the contractual obligations (agreed upon by the obligee and the principal), the principal pays up to the full bonded amount (including legal costs). If a person fails to pay the agreed upon amount, then their corporate and personal assets will be used to pay them. This bond is non-negotiable. If not signed, the surety bond will not be approved. So what is an indemnity bond? An indemnity bond gives the legal right to collect from the principal any amount that the surety has paid out in a claimed situation. As per the agreement, it requires that the company pay a premium. For example, if the surety company must pay another contractor to complete the project, the surety company will make a demand on the bonded contractor that they pay for this expense. The surety company can sue the contractor if they fail to do so. Understanding an indemnity bond is very important. If not...
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