Surety Bonds

When one thinks about the traditional business model, the stock image of a business owner and customer either shaking hands or exchanging cash comes to mind. Those who are a part of the business world understand that this image only begins to scratch the surface of what businesses do on a daily basis. Running a business involves working with a variety of other professionals and customers and these interactions need to be protected. Oral agreements just don’t work anymore. So how do you guarantee to a customer that someone else will perform contracted work? Surety bonds. But what is a surety bond? It’s a contract involving three different parties:

• The principal: the main party who is responsible for performing the contractual service
• The obligee: the party who is receiving the service
• The surety: the party that ensures the principal performs the contractual service

Surety bonds are issued to give the obligee peace of mind that a service will be performed as agreed upon, but it’s also a great way to enhance credibility of the principal. For example, let’s say that a construction company wants to build a commercial property for a bank. The construction company (principal) could offer the bank (obligee) a surety bond secured by an insurance company (surety). If the principal fails to comply with the contract, the surety bond is then turned into the insurance company and losses can be recouped by the bank.

There are two main forms of surety bonds:

• Contract bonds, which include performance, bid, supply, maintenance, and subdivision
• Commercial bonds, which include license & permit, union bonds, etc.

If you’re looking for specific types of surety bonds, our Green Peak insurance agents have access to a variety of surety bonds including, but not limited to:

• Bid Bonds
• Performance Bonds
• Construction Contract Bonds
• Utility Bonds
• License/Permit Bonds
• Miscellaneous Bonds

To secure your contract, contact a Green Peak insurance agent regarding your surety bond needs.