Tag: surety bond

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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By M L

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Surety Bond Vs Letter Of Credit – What’s The Difference?

There are many financial products that help a construction company to grow, both in the private and public sector.  Two of these products, a surety bond and a line of credit, can be helpful in becoming more successful.  Knowing the difference between the two can help your business to grow. Surety Bonds vs Lines of Credit To start, both surety bonds and lines of credit (LOCs) provide financial protection. Yet surety bonds tend to take that protection a step further.  By definition, a surety bond is a three party agreement between the project owner, the surety bond producer and the contractor.  Two of the most utilized surety bonds in the industry are performance bonds and payment bonds.  A performance bond ensures that the contractor upholds the contractual obligations specified in the contract.  A payment bond guarantees that the contractor pays all associated with the project.  This can be anyone from laborers to subcontractors, material suppliers and other employees as specified in the contract.  A LOC is a cash guarantee.  It allows the owner to call upon it on demand.  It works as a payment to the owner, but is an interest loan for the contractor. A surety bond is based...

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Surety Bond Producer as Your Advocate

The worst outcome has happened, you have had a claim filed against your business.  What to do now?  As this can be a stressful time, having someone in your corner can help lift a huge weight off your shoulders.  This is where a surety bond producer as your advocate can be of enormous help. A basic claim procedure begins when someone associated with the job files a claim against you.  They will look over the evidence. If the claim has no backing to it, a surety bond producers acts as an advocate.    The best way to help your surety bond producer is to make sure to document everything.  This includes that you pay for labor or materials on time to when you complete certain aspects of the project.  If you have done your end of the job, then the surety bond producer will help to prove that the claim is false. There are many attributes to look for when working with a surety bond producer, and below we have highlighted some things to consider.  Therefore, if someone does file a claim  against your company, you can be certain that your surety bond producer will protect you and that you...

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Business Service Bond – Apply Now

The U.S. service sector is a growing industry and has expanded over the last decade.  A service industry includes any form of outsourcing, such as human resources, IT, leadership development, home cleaning services, in home personal care, etc.  If a company outsources, it is important that they protect themselves from any form of negligence or fraud. Benefits of Bonding So what are the benefits of requiring a bond for a business that you work with?  The first is to protect yourself from liability due to an employee committing fraud when dealing with a customer.  Another reason, is that you give your customers added assurance by letting them know that your employees or the businesses that you work with are bonded, which could potentially bring in more business.  If a business is taking the extra steps to protect their customers, it helps to build a positive reputation.  In comparison to a standard fidelity bond, a business services bond protects for on-premises incidences. Summary: The service sector is growing exponentially.  Therefore, many businesses are  hiring additional outside employees to continue providing their business’ services to their customers. A business services bond provides protection against any sort of fraudulent or negligent work by...

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What kinds of surety bonds are there?

Surety bonds are a financial guarantee between three parties in a legally binding contract. These three parties are the obligee, the principal, and the surety. In essence, the surety guarantees payment of a specified maximum sum or compensation in case the obligee incurs any damages or loss caused by the actions (or a failure to perform) of the principal. The Principal The principal is the person or company who has to purchase a bond. The surety then provides a financial guarantee to the obligee that the principal is financially sound to undertake the project. The Obligee The obligee is the party that requires the principal to purchase a bond. The Surety The surety is a company that guarantees the bond. Therefore, the surety also provides the financial assurance of the principal. If the principal does not follow the terms and conditions of a bond, the obligee can make a claim and collect damages. If the claims are valid, the surety will reimburse the obligee and then seek reimbursement from the principal. Surety bonds are required by those in business  who provide services to consumers and government offices.  Although surety bonds all have the same purpose, there are different types...

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Guardianship Bonds – Apply Now

A guardianship bond is when a court appoints a person (the guardian) to take care of the affairs of another person (known as the ward). The guardian is entrusted with taking care of the ward’s personal and financial affairs. Sadly, this does not always happen.  One sometimes hears of cases where a guardian abuses their power at the detriment to the ward. A guardianship bond is usually a requirement when the court determines guardianship. Although each guardianship bond varies it is an invaluable reassurance to the family of the ward. It helps to deter those who may seek to be a guardian for their own financial benefit. A guardianship bond acts as a form of assurance that the guardian will fulfill their lawful duties in the best interest of the ward. Like other surety bonds, a guardianship bond is a three party contract between the courts, the guardian and the surety. If a ward suffers at the hands of the guardian, the guardianship bond will cover the damages and then will demand compensation from the guardian to recoup the surety’s money. Here are five times where a guardianship bond can be a lifesaver: 1. Incompetence: Being a guardian can be...

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What You Need to Know About Surety Bond Insurance

As many people may know, a surety bond is a written agreement guaranteeing the satisfactory performance of a contractual obligation. This agreement provides for monetary compensation  in the event that a principal fails to accomplish the job per specifications in the bond. There are many who may confuse surety bonds with insurances. They may think that their purpose are alike, but this is not the case. Here’s what you need to know about surety bond insurance. There are three parties in a surety bond contract are: The Principal – the party that purchases the bond The Obligee – the party that requires the bond The Surety – the party that issues the bond Do I need a surety bond? Do I need a surety bond?  When do I need it and what are the risks if I don’t get one?  These are questions which you may have pondered.  Well, have no fear!  Below we have highlighted some situations where you may need a surety bond. Licensing: Many industries require you to get a surety bond. This ensures that the applicant adheres to specific industry regulations. If they do not adhere to, then the someone may file a claim. Specific to...

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Does Buying a Surety Bond Really Matter for Your Business?

Although surety bonds are becoming more common in society, many people are not familiar with them. Yet, surety bonds are an important safeguard and/or necessity for many business owners, companies, federal and state government agencies. Bonds can play a very crucial role in business. They can protect a business and create trust when dealing with prospective clients. Bonds are a legal requirement by states for various industries. What is a surety bond? A surety bond is an agreement between three parties: the principal, surety and obligee. The surety provides a financial guarantee to the obligee (i.e. a government agency) that the principal (business owner) will fulfill any contractual obligations. The purpose of a surety bond is to guarantee a principal’s integrity, performance and financial responsibility. The main purpose of a surety bond is to make sure that the obligee will perform their contractual obligations. It also guarantees compliance with a law or contract For instance, a small contractor renovating a living room, does not finish the job according to the contract.  Or maybe they fail to abide by the state laws and regulations.  In both cases, they can have a claim filed against them by the consumer, asking or demanding...

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Surety Bond Claim Process – Facts & Tips

It is important to know how to avoid claims in order to protect your business. Therefore, in order to avoid claims, especially false claims, it is important to work with a surety bond producer who is knowledgeable and competent.  To review, a claim is when a client makes a formal accusation against due to their assertion of a violation of the contract.  In order to avoid claims, you need to be certain, first, that you fulfill your contractual obligations.  But, unfortunately, even if you fulfill your contractual obligations, it doesn’t mean you are safe against a false claim.  Working with a surety bond producer who will protect you can be a comforting feeling during a stressful false claim. A surety bond, although necessary, doesn’t protect you from claims.  Instead, it protects the public from you not fulfilling your contractual obligations.  In order to avoid claims, it is important to follow government rules, fulfill all contractual agreements, document everything. As always, if a dispute arises, try to resolve it with the complainant first. If a claim is filed, both sides will argue their case in front of the bonding company.  If the bonding company agrees in your favor, they will help...

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Are all Surety Bond Producers the Same?

Choosing a surety bond producer that is competent and knowledgeable could save your business a good amount of money.  In past Facebook posts, we’ve briefly mentioned the benefits of choosing a surety bond producer who is knowledgeable and competent in order to make sure that you get the correct bond with all the t’s crossed and i’s dotted so that you have the best chance at winning a bid.  But there is also another reason. What to look for in a Surety Bond Producer With surety bonds, you are the one that pays the claim if someone files against you.  The surety bond is there as a three party contract.  But what happens if your surety bond doesn’t fully protect you, and you have to pay for a false claim or pay more than is necessary?  This is where it is important to make sure that the surety bond producer you choose to do business with has years of experience and knows the field, so that you are protected as well. With some larger surety bond producer companies, you are just a numbered file in a filing cabinet. But at Surety Bond Professionals, we pride ourselves on customer service and...

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