Commercial
Bid & Surety Bonds Insurance
Protection to make sure the job gets done.
Commercial
Solutions to satisfy any bonding requirement.
Contract bonds serve as guarantees that all terms and provisions found in a contractual agreement will be fulfilled.
If the contracted party fails to fulfill the duties according to the terms, the owner of the surety can call the bond to recover the losses. Contractors, subcontractors, and suppliers all need contract bonds for their customers.
How do surety bonds work?
A surety bond involves three parties:
- The principal is the person or business with an obligation to perform a task.
- The oblige is the person or business requiring the bond or the guarantee.
- The surety is the company that provides the bond or the guarantee.
If the principal performs their obligation, the surety company has no role. If the principal does not do what is required, the surety company must meet the obligations. If this happens, the surety company is entitled to be reimbursed for losses and costs by the principal. Before a bond is written, the surety company may require the principal to provide an indemnity agreement from the business and the personal indemnity of the principal.
What types of Contract Surety Bonds are there?
Bid Bonds
Provide financial protection to an obligee, giving assurance that if the principal contractor is the successful bidder, he/she can provide a performance and/or payment bond.
Performance Bonds
Provide financial protection to an obligee, giving assurance that if the principal contractor fails to perform the contract in accordance with its terms and conditions, and the obligee declares the principal contractor in default and terminates the contract, it can call on the surety to meet the obligations under the bond.
Payment Bonds
Provide financial protection to an obligee, assuring that the contractor will pay certain workers, subcontractors, and material suppliers in accordance with the terms and conditions of the contract.
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