The Fundamentals of Surety Insurance

Whenever you request a surety insurance bond, you are enacting a three-party guarantee designed to protect something that you want to happen. You are the obligee, the party that actually performs the guarantee is the principal, and the backer of the bond is the surety. Together, you and the two other parties will ensure that your desire is fulfilled. Agreements of this nature are made often in a wide variety of industries, from construction to telemarketing. There are three major classifications of bonds, and the type of business you are involved in determines which classification your bond will fall under. Commercial Bonds This is commonly tied to the license or permit of a business. Basically, it guarantees that the businesses will abide by the regulations of their licenses or permits. Whenever you enter this kind of arrangement, you only want to work with trustworthy businesses that will be held accountable if they somehow let the guarantee fail. Car dealerships, collection agencies, telemarketing firms, and mortgage brokers are examples of companies that are usually involved in commercial bonds. Contract Bond This is tied to a contract for work. Contractors are guaranteed to complete their jobs as stated in the contract’s terms; otherwise there will be consequences for their compensation. Due to the fact that contracted work is the lifeblood of their industry, construction companies are the most common parties involved in this type of surety insurance arrangement. Court Bond This bond focuses on situations involving estates and guardianship. Large amounts of money tend to change hands in inheritance cases, and guarantees regarding the use of this money need to be made. A surety insurance agreement of this type essentially guarantees to the court that any and all money will be used in an appropriate manner. Sometimes, clients may think that the surety insurance process feels much like any other insurance process. Premiums are paid, and coverage is given for a term in the event that something goes horribly wrong. Bonds should be seen more like lines of credit, though. If you or the principal mess anything up, then the surety is well within its rights to request repayment from you for any losses or cancel your bond. It isn’t much like crashing a car, filing a claim, paying a deductible, and then proceeding to watch your rates shoot up. As you can see, surety insurance may have a few challenges, but its many advantages make it more than worth your while. It is a comprehensive process that was meant for comprehensive projects that require protection. Many of these projects require gigantic investments of time and money, so you will definitely want to have the sturdiest of guarantees on your side. When everything comes together correctly, principals will be well compensated for their work, backers will receive their due, and you will be elated at your project’s happy ending.