You must have heard about surety bonds before. But do you know what exactly it is? In this post today, we will take the opportunity to discuss everything about surety bonds that you should know.
What are surety bonds?
In simple words, surety bonds are a type of insurance that is paid for by you. The party with the insurance is called as oblige, and they are a person who is need of the insurance policy.
Usually, the obligee is a government-owned agency. The bond is meant to protect the government along with its citizens. The principal is you and the government needs you to pay for the surety bonds.
To get a surety bond, you have to follow certain terms and conditions. In case, you are unable to follow the terms, it is referred to as surety bonds claims. In this case, you are required to pay for everything. This includes even the legal costs of the surety bond claims.
To get a surety bond, you need to sign an agreement of indemnity. By signing this agreement, you agreeing to pay for the surety for legal costs and claims that may generate if you fail to follow the set terms.
When do you need a Surety Bond?
Here are some situations in which you may need a surety bond.
- Contractors need a surety bond for their construction projects.
- You may need a surety bond when you are involved in a court proceeding. This type of surety bond is called the court bond.
- Industries can require a surety bond before starting their own business. legally.
- Fidelity bonds are also surety bonds. This type of surety bond is meant to protect your business from fraud, embezzlement, and theft from employees.
Benefits of a Surety Bond
There are many benefits associated with surety bonds. Before you get a surety bond, you should once go through the pointers below.
- Surety bonds boost the credibility of your company.
- In times of unwarranted claims, they keep you protected.
- With the help of surety bonds, you can keep your activities confidential.
- For someone who is starting a company of his own can make use of a surety bond to utilize a full active line of credit that is provided to by your financial institution.
- Surety bond binds you to the surety company. This will allow you to access various professionals such as estimators, lawyers, and accountants.
From the above discussion, we get to know the importance of surety bonds. If you want to get a surety bond, you have to make sure that you follow the set terms and conditions, or it may create problems for you.