Bonds / Surety
Greensboro, NC - Market St, Summit Insurance Solutions - Greensboro, NC, Greensboro, NC - Cornwallis Dr, Davis Insurance Group, North Carolina
Our surety bonds department works with clients to develop customized bond programs that fit each client's unique needs.
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What is a surety bond?
If you’ve ever felt frustrated trying to figure out what precisely a surety bond is, don’t worry — you’re not alone. Surety bonds are confusing if you don’t already know what they are. We can help you break it down. If your business is unable to meet all the contract requirements satisfactorily, then the surety company will step in to fulfill your obligations. After the surety fulfills the contract, your company — as the principal — is responsible for making the surety whole. The surety will look to you to reimburse the losses they incurred when fulfilling your obligation. The surety bond process begins when an obligee requires a principal to acquire a surety bond. By doing so, the principal can show the obligee they can fulfill the obligee’s project or requirement. For example, let’s say you own a construction company that’s working on a government-funded contract to build a road, and you are required to provide a surety bond. In this case, your company is the principal, and the government would be the obligee. A neutral third party, in this case, a surety bond company, would evaluate your business to determine whether your company would be able to complete the project as described in the contract. Unlike standard insurance, there's a lot of documentation and information required to apply for a surety bond. The documentation required varies from bond to bond, but most companies ask for the following: Remember, this isn't an exhaustive list. A lot of surety bond companies have additional requirements. It may seem like a hassle to provide all this documentation but keep the bigger picture in mind. With this documentation, you're showing the surety bond company you are experienced and responsible enough to meet the contract's requirements. The surety bond process begins when an obligee requires a principal to acquire a surety bond. By doing so, the principal can show the obligee they can fulfill the obligee's project or requirement. For example, let's say you own a construction company that's working on a government-funded contract to build a road, and you are required to provide a surety bond. In this case, your company is the principal, and the government would be the obligee. A neutral third party, in this case, a surety bond company, would evaluate your business to determine whether your company would be able to complete the project as described in the contract.Frequently Asked Questions
If your business is unable to meet all the contract requirements satisfactorily, then the surety company will step in to fulfill your obligations. After the surety fulfills the contract, your company as the principal is responsible for making the surety whole. The surety will look to you to reimburse the losses they incurred when fulfilling your obligation.
Surety bonds are issued for a set term usually, one, two, or three years or are set up to last until the initial contract or statute is fulfilled. They can also be extended to allow for a maintenance period if problems arise or the principal did not satisfactorily meet the initial terms.
Even though you can usually purchase a surety bond through an insurance company, surety bonds and insurance are not the same. They are both forms of financial protection, but there are a few key differences.
Surety bonds ensure a commitment by the principal, and loss is not expected.
Insurance guarantees a coverage of losses and is meant to protect the consumer buying the policy.
Surety bonds require a one-time payment.
Insurance is often paid in monthly premiums.
You can find thousands of different surety bonds specific to different situations. However, the bonds used most frequently are contract, commercial, court, and fidelity bonds.
Contract generally required in the construction industry. Contract surety bonds ensure a contractor the principal will fulfill the contract.
Commercial designed to ensure that licensed businesses will meet safety requirements set forth by public, legal, and government entities.
Court meant to protect plaintiffs and defendants from fraud or financial harm.
Fidelity helps protect businesses from losses occurring because of employee dishonesty and fraud.
The best way to find out your surety bond requirements is to contact the obligee requiring the bond and ask them directly what type of bond you need, and the dollar amount the bond needs to guarantee. Requirements vary among states, counties, and cities, so there's no one-size-fits-all answer.
Generally, if you need a surety bond, you will be informed of the requirement along with any specific conditions the bond must meet. However, there are people and groups who will always require a surety bond. These people and groups may include:
Anyone applying for a license with their city or state
Construction companies working for government entities
As professionals in the field of surety bonds, we make it our business to know you and your concerns. We spend time learning and listening to better serve you, our clients.
We'd love to chat with you. Contact us today!