Bonds are legal agreements between sureties, contractors, and property owners. The surety (usually an insurance company) agrees to perform the contractor’s duties if he fails. But the surety’s liability is often capped at the bond’s face value. An indemnity agreement is usually signed by the firm and the insured, which includes personal indemnities by significant parties to the contractor, to ensure that any responsibilities the surety has in settling the job or in paying suppliers and subcontractors be recovered to the contractor. Wanna know more? Read on and get to know everything about surety bonds before making any decision.
Surety and Insurance are Different
Bonds are a common product offered by insurers but are not insurance. In contrast to insurance, which is a bilateral agreement between two parties, surety bonds are issued to guarantee compliance with rules and provide assurance of the bond’s performance to protect the interests of a third party. The principal (the person or entity buying the bond), the obligee (the government entity or private company requiring the bond), and the surety (the entity providing the bond) enter into a legally binding contract known as a surety bond (the underwriter or the issuer of the bond).
If you have any questions or concerns about your bond, your surety bond agency, O’ShaughnaHill Surety & Insurance, is there to help. If you need further information, there are other resources to consider. Having a direct point of contact with your obligee is also beneficial if you have any queries regarding the specific regulations that apply to your business in the municipality. We offer great resources for companies that must comply with bonding regulations.
Different Surety Bonds
Bonds may be of many different types. Below you’ll discover a list of bond categories representing a wide range of industry-specific bond options. The vast majority of surety bonds, meanwhile, may be categorized as either commercial bonds, probate and court bonds, loyalty bonds, or contract bonds.
The term “license bond” is often used to refer to commercial bonds. These bonds are often used to safeguard professionals and company owners from noncompliance with applicable laws and regulations by their workers during their employment. They check for authenticity and make sure the person or company is trustworthy. Automobile dealer surety bonds and liquor store surety bonds are two commercial bonds.
Court & Probate Bonds
Court and probate bonds ensure that appointed court officials (such as administrators, guardians, executors, and trustees) will perform their duties. They ensure that a debt is settled or a trust is administered fairly and legally.
They prevent businesses from bearing the costs of fraud and dishonest personnel, who may steal money or securities. Further, they serve as a barrier against dishonesty and theft. This is for the safety of your business and your customers from potential fraud and theft.
If you want to acquire your license, you may need to secure a surety bond
You May Need a Surety Bond to Get a License
For most businesses and people, buying bonds is a necessary step in the licensing process. For instance, when applying for a contractor’s license with their state’s regulating body, several jurisdictions demand that prospective contractors provide proof of contract license security. Another good example would be the dealer’s bond required of most businesses before the state, city, or county issues a license to operate a dealership’s fleet of automobiles.
New Startups Can Get Bond
Many believe that a successful track record in the company is required to get a surety bond. Although the time of day or the company’s name may not be significant, many new businesses need to post bonds before legally opening their doors to the public. Even if your company has only been open for a short period, we can still help you have the proper bonds in place. And since they haven’t had time to build a reliable credit history and track record of responsibility, new company owners may have to pay more for bonds.
Having a Co-signer Is a Good Option
A common misconception among company owners is that getting a co-signer on an insurance bond to boost the applicant’s creditworthiness and lower the price and cost is impossible. A co-signer may be worth considering if you have poor credit and need a bond but can’t qualify on your own. Any time an insurance company can lessen the risk they are taking, such as when a second person can sign on the bond, they will naturally do so. This puts the co-credit signers in danger, but an investor or business partner with skin in the game might be a perfect choice. Because not all bonds or sureties allow for co-signers, it’s important to discuss your situation with a bond expert.