Surety bonds are not actually a type of insurance, but more of a credit service. It is a service that works between three parties:
The Principal is the one bidding on a job and needing to get a bond. The Obligee is the one requiring the job done and requiring the bond. The Surety is the one providing financial backing for the bond.
Let’s say there is a job that the Obligee needs to be accomplished within 3 months. The Principal (contractor) gets a bond as surety that they will get the job done by the requested time. Unexpectedly, the construction company’s main employee leaves the state to care for his ailing parents. This puts the Principal (contractor) in a bad spot. He will not be able to perform the task in time. The Surety steps up to pay for another company to finish the job within the time required. This ensures that the Obligee gets what he needs, and the Principal won’t need to worry about a lawsuit due to lack of timely performance. The Principal will need to pay the Surety back for all costs, but saves, in the long run, thanks to no lawsuit.
Some jobs may require a surety bond legally, for example, large commercial projects and government projects. With others, it can just be the logical thing to do as a sort of insurance for both parties involved.
There are many types of bonds available. Here are just a few of the most common bonds needed for various jobs:
Performance: guarantees the performance of the work agreed on
Payment: guarantees payment to subcontractors and vendors
Indemnity: for failed deadlines, losses will be covered
Contract: ensures a contractor will perform duties as agreed upon
Not all insurance companies offer surety bonds, but She Will Insurance has the surety bond you need. Give us a call today.
