A surety bond is an insurance policy between the party that acquires the bonds and the obligee. The obligee is normally a government agency and the bond is used to protect the government. You are required by the obligee to pay for the surety bond and you can file a claim if the bond’s promise is not met. Claims will need to be repaid by the principal if the bond does not meet the promise. There are times when a surety bond is required. As surety bonds can become complex and confusing, call Mountain Ridge Insurance to discuss a surety bond.
Understanding Surety Bonds
If you are required to obtain a surety bond, you will need to abide by the terms of the bond or face a claim. All claims will need to be paid by you. The bond is backed by a surety, which includes an indemnity agreement. The indemnity agreement will be signed by all company owners and will pledge your personal assets and corporate assets to reimburse the surety if there is a claim or legal fees.
Essentially the surety says you agree to cover the expenses. However, you can face serious trouble if the surety bond payment cannot be collected through you or the court. You do need to be careful here as you need to know you can face serious financial and legal obligations if you cause a claim and cannot pay them.
What is Surety Insurance?
Surety insurance is used by business owners that want to protect the business. Surety bonds are not designed to protect you, they are designed to protect the obligee. Fidelity bonds are the ones designed to protect you and your customers and employees. The surety bond simply provides you with surety credit.
How Do I Choose a Surety Bond?
As previously mentioned, surety bonds can be confusing for a lot of people. How do you know if you are selecting the right one? You need to work with an experienced insurance agent to determine which bond you need. If you choose the wrong bond, you will be rejected by the obligee. Here are some of the common surety bond options:
- License bonds
- Court bonds
- Fidelity bonds
For more information about surety bonds and other business insurance needs, contact Mountain Ridge Insurance today at 801-752-0520!