COMMON Q & A
What is a surety bond?
A surety bond is a guarantee from a third party that the obligations between two parties will be fulfilled. There are three parties involved: the obligee (entity requiring the bond and to whom the bond is payable), the principal (individual/entity who is being required by the obligee to obtain a bond), and the surety (company who writes the bond, backing the guarantee to the obligee).
Is a surety bond the same as insurance?
Bonds are often confused with insurance. They are both considered risk management; however that is as far as similarities go. For example, if you are the principal (one being required to provide a bond), it is imperative to understand that the bond does not protect you, it protects another party from your failure to meet your obligations, whereas insurance would protect you (the principal).
What is the process to get a surety bond?
The process to obtain a bond varies depending on what type and amount of bond. The most efficient way to expedite the bonding procedure is to call us (623)256-1000 to get started. Some bonds require very little personal information and can be approved very quickly. Others may require personal financial statements, tax returns, etc.
Typically, in order to obtain a surety bond, the applicant (principal) must sign an indemnity agreement that promises to repay the bonding company for any losses incurred while making good on any obligations the principal is not willing or able to satisfy.
What happens if I don’t fulfill my obligations and a claim is made?
In the event of a claim, the surety company will investigate the claim and decide whether or not the claim is in fact valid. If the principal does not satisfy the claimant, the surety will pay the claim amount or complete the obligation. At that time, the surety would contact the principal and ask to be repaid for any losses they incurred.
How do I know if I need a surety bond?
You only need a surety bond if you are asked to provide one to guarantee your obligations with the exception of certain fidelity bonds.
Can I get a surety bond with bad credit?
Certain bonds are approved subject to credit history and the financial position of all owners. In the event that the owners do not qualify for preferred or standard premium rates, we have multiple markets that are able to assist in these situations. We will review each case separately and determine which market will best suit the applicant (principal). We understand that there are extenuating circumstances and your credit score does not necessarily reflect any one person’s ability to meet an obligation. We will look at the applicant as a whole and not simply as a credit score.
What is the benefit to providing a surety bond?
Not everybody can get a bond so by getting a bond you are presenting yourself as a professional and financially stable entity and therefore credible. Also, in order to bid and perform work with certain entities, especially public entities like cities, states and the Federal Government, you may be required to provide a bond.
How long does it take to get a bond?
This depends on the type and amount of bond. Most bonds can be approved the same day, however bonds cannot be released until payment has been received.