Securing bonds can be a beneficial strategy for your business—many construction projects require bonds before work can begin. Additionally, being bonded may help you build trust with your clients because they provide financial assurances that you will fulfill your contracts with them.
Securing the bonds that are right for your business may seem like a complicated topic, but the knowledgeable professionals at Chichester Insurance Agency Inc. in Blythewood, South Carolina, are ready to help. Contact us today to get started.
Surety bonds are a type of bond that provide guarantees that your business will meet contractual obligations or applicable regulations.
A surety bond is an agreement among three parties:
· The principal is the party, usually a contractor or a business, that purchases the surety bond.
· The obligee is the governmental or private party that requires the principal to secure a bond.
· The surety is the entity that underwrites the bond. For example, an insurance company may be a surety.
If the principal fails to fulfill its contractual obligations to the obligee, the obligee may file a claim against the surety bond. Then, the surety will typically investigate the issue, and the principal may have an opportunity to remedy the situation. However, if the issue is not rectified, the surety may compensate the obligee up to the bond’s amount. Following this, the surety will typically seek reimbursement from the principal for that expense.
There are multiple types of surety bonds, including contract bonds and commercial bonds.
Contract Surety Bonds
Contract surety bonds provide guarantees businesses will satisfy a contract’s terms. They may also be required before work begins. Contract bond examples include:
· Bid bonds—These provide assurances to your potential clients that you submitted a bid in good faith. It also provides guarantees that you will begin a project if you are awarded the contract.
· Performance bonds—If a client enters into a contract with your business, these provide guarantees that you will complete a project as outlined in the agreement.
· Maintenance bonds—These provide guarantees to the client that if there is a defect in workmanship, design or materials, it will be remedied. Maintenance bonds are usually effective for a set term (e.g., one year) after a construction project is finished.
Other types of contract bonds may be available (e.g., payment bonds). Contact your insurance agent for more details.
Commercial Surety Bonds
Commercial surety bonds provide guarantees that a business will comply with specific requirements. For example, license and permit bonds provide assurances that your company will adhere to regulations and laws applicable to your industry.
The team at Chichester Insurance Agency can help you secure the bonds you need. Contact us today for more information.
This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.