Surety bonds are powerful tools issued through surety bond agents and brokers. These types of bonds are directly responsible for economic development and the facilitation of commerce. These bonds normally involve three different parties, all of which have different actions to take once an agreement is signed. Once surety bond agreements are entered into, a binding contract is formed between the contractor performing the work, the person or firm requesting work to be done, and the surety bonding company.
What the surety bond does is guarantee that the work will be completed by the contractor. If for some reason the work isn't completed satisfactorily, the surety company assumes responsibility for the work and ensures the client that the work will be completed in a timely fashion. So while the principal party undertakes the obligation to be performed, the surety company guarantees the client, who is the beneficiary of the bond, that the work will be performed.
Good surety companies and bond producers will help contractors maintain their surety business in addition to taking on new clients. There is a national service available that specializes in surety bonding companies. The National Association of Surety Bond Producers may be a great place to start looking for information on Surety Bonds and the companies that issue them.
Types of Surety Bonds
Surety companies today usually either exist on their own or within a large insurance company. While there are exceptions sometimes, most surety companies need to be licensed by the state in which the bond is being issued or the work performed. Most surety bonds are issued both on a commercial basis or a contract basis, and depending on the type of work, different types of surety bonds are available.
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By Jamie Ward
