SURETY BASICS
The term ‘surety bond’ is a generic term that is used to refer to thousands of different bonds. A surety bond is a legal document under which a surety company provides assurance for the faithful performance of its principal. There are always three parties involved in a surety bond:
1. Principal/Contractor (the party performing the work)
2. Obligee/Owner (the party requiring the bond)
3. Surety Company (the party guaranteeing the obligations of the principal to the obligee)
Put simply, a surety bond is an instrument under which one party (the surety) guarantees to another (the obligee) that the obligations of a third (the principal) will be performed in accordance with a contract, statute or regulation. It is intended to assure and protect the obligee, not the principal.
A surety bond is not an insurance policy. An insurance policy assumes that there will be a loss and therefore the premium is calculated to cover the losses that will occur. A bond is an extension of credit with the assumption that the legal obligation will be fulfilled and there will be no loss. Therefore, the bond premium is calculated to cover only the underwriting expenses of the surety company. When losses occur, they have a significant impact on the surety company’s financial results.
As stated above, there are thousands or different types of surety bonds. At Glenn A. Evans & Company, we specialize in the following:
CONTRACT BONDS
LICENSE & PERMIT BONDS
PUBLIC OFFICIAL BONDS
MISCELLANEOUS BONDS
Each type of surety bond has its own requirements. Some are freely written with very little required information. Others are more involved and require much more detailed underwriting information. Please feel free to click on each of the categories above to see the requirements for the type of bond you need. We are here to help if you need assistance in determining what type of bond you need or if you have additional questions. Please feel free to contact us at any time.