Public and private contracts frequently require surety bonds offered by surety companies. Surety bonds help provide assurances to your clients that you will complete a job as promised. The professionals at Regina Jasak can assist you in securing surety bonds. Contact us today to get started.
Surety Bond Parties
A surety bond is a contract among three parties, the principal, the obligee and the surety. It provides assurances an entity will act in accordance with the bond’s terms.
· The principal is typically a contractor or a business. It is the party that purchases the surety bond. By being bonded, the principal provides guarantees that they will meet specific obligations. Depending on the type of surety bond, the principal’s obligations may be fulfilling a contract or complying with applicable laws and regulations.
· The obligee is the governmental party or private party that may require the principal to obtain a surety bond. If the principal defaults on the agreement, the obligee may receive the remedy.
· The surety is an entity (e.g., insurance company or surety company) that underwrites the bond. The surety is the party that provides remedy to the obligee if a principal does not fulfill their agreed-upon obligations or duties.
How Does a Surety Bond Work?
The obligee may file a claim against the surety bond if the principal does not fulfill its obligations. The surety may then provide compensation to the obligee. Typically, the surety will then seek reimbursement from the principal.
Types of Surety Bonds
There are two broad categories of surety bonds: contract bonds and commercial bonds.
Contract bonds are also known as construction bonds. They help ensure that principals will adhere to the terms in a contract, such as satisfactorily completing the work and paying subcontractors and suppliers. Common types of contract bonds include:
· Performance bond—A performance bond guarantees satisfactory completion of the tasks listed in the contract.
· Bid bond—This type of contract bond gives guarantees that a contractor put forward a bid in good faith and will start the job if awarded the contract.
· Payment bond—A payment bond provides guarantees that parties involved in the project, such as subcontractors, laborers and suppliers, will be paid for their work or materials.
· Maintenance bond—A maintenance bond provides assurances that a defect in materials or workmanship will be remedied. A maintenance bond usually is in place for a limited term (e.g., one or two years)
Other types of contract bonds may be available and projects or project phases may require specific bond coverages. Your agent can assist you in finding the contract bonds that may be best for your business.
Commercial bonds are another type of surety bond; they may be required by a governmental entity. One of the most common examples of commercial bonds are licenses and permit bonds. These provide assurances that a business will adhere to laws, ordinances and regulations.
Contact Us Today
The team at Regina Jasak can provide more details on surety bonds and help you find the coverages you need. Contact us today to learn more about the available options.