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 understood properly, there are certain damaging consequences that may occur. The reputation of the company will suffer if the company decides not to pay the claim. This may result in colleagues or future clients viewing the company as incompetent and unprofessional. Not paying claims on a bond can also lead to bankruptcy and legal action.
Most people have a basic understanding about surety bonds. But few have a complete and vast knowledge about them. Understanding what a bond guarantees, simply by reading the bond form, can seem overwhelming. As professional bond service experts, we provide detailed knowledge about the surety bond and suggest what is best for you.
When is an indemnity bond required?
There can be various reasons where an indemnity bond is required. For example, in the construction industry, when buying a home, company or shares or when dealing with government indemnity schemes.
It is important to include in this list a contractor’s license bonds as well. This is legal protection for three parties: the contractor, the company, and the state bond issuing agency. By getting a contractor license bond, it helps to ensure that projects progress professionally and ethically.
Seeking Professional Help
Despite the fact that a contractor often has years of experience, it is always good to seek professional advice. It takes only one mistake for a claim to occur. For complete peace of mind, buy bonds that will cover any allegations.
If you are looking for indemnity bond services in New York City or nationwide, we would be more than happy to serve you. Our experts are always here to help. What makes us stand out from the crowd are a wide range of services which include personal service, professional advocacy through our tactical financial process, the largest number of solid underwriters and carrier relationships, integrity, honesty and commitment to our clients.