A Surety Bond is a three party instrument consisting of the Principal (applicant), Obligee (entity requiring the bond) and the Surety (the insurance company) used to to ensure the completion or observance of contractual obligations.
A Surety Bond is NOT insurance but a line of credit. In the event of a claim or loss by the Surety the Principal is responsible to reimburse the surety for the loss. Make sure to review the Indemnity Agreement carefully when having a bond issued.
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The cost of the surety bond(s) will be be based on the applicant's credit, work experience, and financial strength. Surety bonds are essentially a line of credit and therefore the cost can vary greatly between applicants.
Our agency has built relationships with a number of Sureties to ensure that we can offer the most competitive prices for each applicant regardless of the type of bond required. We have also creative solutions for individuals with injured credit.
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The General Indemnity Agreement (GIA) or Agreement of Indemnity is the legal contract between all parties involved. It ensures that in the event of a claim that the principal will reimburse the Surety for any monies paid on a claim including any legal expenses.
Many Sureties or programs will require a corporate, personal, and spousal indemnity to ensure the bonds are properly secured. Make sure to review the documents carefully to understand the agreement that you are signing.
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Individual and Spousal Indemnity are often required due to personal net worth and common property laws used when securing the surety bond(s). Spousal involvement or ownership in the company is NOT the determining factor when determining requirements for underwriting.
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Surety Bonds act as the financial obligation to act as a guarantee. The Principal (you) will pay a percentage of the bond penalty winch will vary depending on the guarantee and your qualifications. The Surety then extends a "line of surety credit" to the Obligee (the party requiring the guarantee). A claim can arise when the Principal does not abide by the terms of the guarantee or the bond. In the event of such an occurrence the surety will investigate the claim to ensure it is valid. If the claim is valid then the surety "pays out" on the claim thereby seeking reimbursement from the Principal for the claim amount plus any associated legal fees.
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A BOR (Broker of Record) is the process of changing the active Agency or Broker who manages a surety bond or an account with a given insurance company. The Bond or Policy will remain with the current insurance company or surety but the new agency/broker will be responsible for the billing and maintained of the account. Please note: a BOR will typically terminate the relationship with the previous agency or broker.
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The purpose of a bond is not to protect the Principal (you) but your customers or those you interact with. It is required because the government authority or private entity has made the requirement to ensure you follow the guidelines or contract. There are lines of insurance which will offer protection to you or your company. Call us at 866-722-9239 to learn more.
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Surety bonds are not insurance but a line of credit. The bond is an ideal alternative to posting large sums of collateral or letters of credit with various government agencies or private entities. They also act as a pre-qualification for many applicants to ensure that certain guidelines or restrictions are met.
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Approval times will vary depending on the type and the size of bond that you're applying for. Certain bonding obligations carry more risk than others and will require additional information and underwriting while other bonds are "instant issue" due to the low risk or size. Typically the underwriting will take 1-2 days for low risk bonds and up to 3-4 days for larger or higher risk obligations assuming we have all the underwriting items required for the submission.
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Have a Question that you don't see listed?
Give us a call at 866-722-9239 or use our Contact Form to send your specific question and a member of our team will get back to you promptly.
If you have additional questions regarding the indemnity or requirements of the approval please don't hesitate to contact our office.
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05/01/2009 FTC Business Alert - New ‘Red Flag’ Requirements for Financial Institutions and Creditors Will Help Fight Identity Theft is in effect. How will it affect you?
04/23/2009 S.A.F.E. Mortgage Licensing Act of 2008 Changes in current and upcoming legislation will modify current licensing requirements. See how your state requirements could be affected.
Frequently Asked Questions
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