Surety Bond is a three-party agreement whereby the surety guarantees to the obligee (the project owner) that the principal (the contractor) is capable of performing the contract in accordance with the contract documents. Performance of the contract, which is the subject of the bond, determines the rights and obligations of the surety and the obligee.
Here are the eight different families of surety bonds:
Public Official Bonds
License and Permit Bonds
Contract Bonds (Bid and Performance Bonds)
Miscellaneous and Federal Bonds
Surety Bonds are often confused with insurance policies, but it’s important to remember that they are a completely separate product. Whereas an insurance policy would likely protect a contractor’s interests, Surety Bonds protect the customer’s interests. Applicants should know their required bond amount as determined by their applicable license or registration. These bonds can be purchased as 1, 2 or 3-year term bonds.
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