Still stumped? Lance Surety Bond Associates, Inc. is a Pennsylvania-based surety bond agency that offers bonding at competitive rates in all 50 states. A contract under which one party (the surety) guarantees the performance of certain obligations of a second party (the principal) to a third party (the obligee). Other surety bonds guarantee payment of tax or other financial obligations. This is not true. A false misconception is that a surety bond is insurance for your business. It is a three-party contract where party A (the surety) guarantees that party B (the principal - the company/person that needs a bond, such as a general contractor) will perform according to the terms of the agreement that is put forth by Party C (the Obligee). The Office of General Counsel issued the following opinion on June 18, 2002, representing the position of the New York State Insurance Department. Examples of a license violation could include fraud, misrepresentation, or late payment. In some cases business and/or personal financials may also be requested by the surety company. The three parties in a surety agreement are: A surety bond is a contract where one party, the SURETY (who assures the obligee that the principal can perform the task), guarantees the performance of certain obligations of a second party, the PRINCIPAL (the contractor or business who will perform the contractual obligation), to a third party, the OBLIGEE (the project owner who is the recipient of an obligation). Typically, they ensure compliance with relevant business codes and other regulations. They’re mistaken for insurance because they often involve payment when things don’t go as planned. Another common type of surety bond called is referred to as a contract bond. What is the Definition of a Surety Bond? Before becoming bonded, you will be required to sign a indemnity agreement with the surety company where you must agree to pay the surety back if they have to pay a claim due a violation by your company. Although a surety company is typically part of an insurance company, the surety bond is not a typical insurance policy. In most cases, surety bonds are purchased to satisfy occupational licensing requirements set out by a federal, state or local government authority. As part of the surety bond application, the applicant will usually need to provide basic information on the business and its owners such as names, addresses, and years in business. Surety Bonds vs. Insurance The main difference between surety bonds and insurance is who the policy protects. FREE Quotes | No Obligation | 100% Secure. There are two other techniques that are commonly used to strengthen a surety bond application and help secure an approval or get a lower premium. Many state contractor license and auto dealer bonds are written as continuous bonds. You can see a comprehensive list on our license and permit bonds page. In the construction industry, surety bonds typically ensure that a bonded contractor will fulfill their obligations specified in a signed contract. What is a surety bond? A surety bond, in the context of construction, is a guarantee that a contractor will perform a certain action stated in the bond – whether that’s to complete the project, properly pay subcontractors, or honor the budget. If a covered violations causes a claim against the bond that the principal is unable to resolve, the surety will be required to pay the claim to the obligee. Nationwide Surety Bond Services We provide efficient Surety Bond Services for the entire United States. Freight broker bonds are filed electronically, but we have included the bond form to use as reference: Contractor license bonds are required in almost every state and many counties and municipalities have additional requirements of their own. For any questions, do not hesitate to contact Lance Surety Bonds at 877-514-5146! In some cases, additional information may be required of the applicant but this information can usually be sent to the agent electronically. Professionals needing bonding or insurance should contact NFP Surety, one of the leading financial organizations in the country, and one of the premier providers of both bonds vs insurance policies. If a bonded contractor defaults on the contract, the surety guarantees that the obligee will be made whole. This information will include the bond type, bond amount, and any other specific requirements the obligee may impose. It also outlines the obligation associated with the bond. Our family has been writing Surety Bonds since 1971. These surety bonds provide a guarantee that contractors complete construction projects in accordance with specifications and make all required payments to subcontractors and suppliers. Working exclusively with A-rated and T-listed bonding companies gives us the confidence to offer a 100% money-back guarantee. Much of the underwriting is automated to allow for rapid approvals and pricing. The only place that you may need to wait is when submitting your bond to the obligee if they require submission of the bond and your application documents in person. Having a paid surety claim may make it very difficult for you to become bonded again in the future, as it is a standard question on all bond applications, and is usually a cause for declination. If you’re wondering what a surety bond is, you’ve come to the right place. They also provide protection to people who hire contractors for a job. It is a type of guarantee agreement that is often offered by insurance and bonding companies. A surety bond acts as insurance for the obligee in case the principal does not uphold its contractual obligations.
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