Here's why you need to work with a broker
Whether you run a small contracting firm or you're with an established business in the construction industry that oversees complex projects, you want to work with experienced professionals who can help you find a solution that satisfies any surety bond requirement. With INSKING, you get that — and more.
What Is Surety Bond Insurance?
Surety bond insurance is a financial guarantee that the covered party will fulfill their contractual obligations. There are three parties involved in a surety bond:
• The principal is the party who is covered and who is obligated to fulfill the terms.
• The obligee is the party requesting the guarantee.
• The surety is the party that issues the bond.
There are different types of surety bonds. They all work the same way but for different types of industries or professions. With any surety bond, if the principal fails to comply with the agreed-upon terms, then the obligee may file a claim on the bond. The surety is then obligated to pay the proceeds of the claim to the obligee to cover losses.
Surety Bond Insurance for the Construction Industry
Approximately two-thirds of all insurance bonds written are issued to construction companies. There are several types of surety bonds applicable to the construction industry. These typically include:
• Contract bonds, also commonly called construction bonds, guarantee that the construction will be completed according to the terms of the contract. If the contractor does not complete the job on time, to specification or leaves the job unfinished, the developer can file a claim to cover their financial losses.
• Bid bonds provide assurance that the principal can and will meet the specific requirements contained in the bid. They are commonly combined with performance bonds that ensure the completion of a project.
• Payment bonds are common in federal and commercial construction to ensure that the suppliers, subcontractors and laborers will be paid.
• Maintenance bonds cover the materials and workmanship for a period of up to two years after construction is completed.
Specific types of jobs may be required to have very specific types of surety bond insurance, such as bonds for motor vehicle dealers or contractor licenses. Businesses that will use a considerable volume of utilities may be required to have a utility bond to ensure payment.
Why Would a Business Need To Have Surety Bond Insurance?
Small businesses can use surety bonds to be more competitive when soliciting contracts, as there is an additional level of assurance that the project will be completed. When government agencies hire contractors to complete a project, they commonly request that the contracting company provide surety bond insurance. A company may also want a fidelity bond to cover them in the event of theft, fraud or embezzlement.
Additionally, there are federal and state requirements that mandate surety bond insurance for different industries. Licensing and permit bonds are designed to assure the client that you will perform your job ethically and in conformance with the rules of your profession. The laws vary, so you would need to check the specific laws in your state for licensing and permit rules.
Our experts have long-standing relationships with leading fidelity and surety companies across North America, along with the ability to satisfy countersignature laws and meet client needs anywhere in North America. And to make your life even easier, you can count on service that minimizes paperwork and focuses instead on ensuring a 24-hour turnaround on surety bond requests once your account is established with us.
Contact a INSKING broker to get started.