Surety Bonds

In general terms, a surety bond is a three-party agreement between the Surety (the carrier), the Principal (the applicant or contractor) and the obligee (the party requesting the bond).

There are several types of surety bonds and the Obligee may be different. For instance, in a License and Permit bond, the Obligee may be a government agency who needs the applicant to be bonded before a license or permit is granted.

In a contract bond, the Obligee may be the construction project owner or general contractor. In a Sub-division bond, a city or county may be the Obligee and needs a surety bond before a construction permit is granted.

The bond is issued or executed in favor of the Obligee.

No. In a surety bond, the principal must perform as promised otherwise a claim can be filed against the surety bond.

If a claim is filed, the surety will investigate the claim and contact all parties. If the claim is valid and the principal still fails to fulfill its bonded obligation the principal is responsible to reimburse the Surety all payments and expenses resulting from such claim and breach.

On the other hand, insurance is a two-party agreement and when the insurance company pays a claim, it does not expect to be reimbursed by the insured.

Before a bond is executed, we will need the principal(s) and spouse(s) to complete and sign the appropriate Indemnity Agreement.

The Indemnity Agreement is an agreement between the surety and the principal. This legal document is very important and establishes the obligations of the principal.

Also, the principal agrees to indemnify the surety for all costs and expenses in case of a claim. Some indemnity agreements must be notarized and/or witnessed.

There are several reasons why your application for a surety bond has been denied in the past. Some of the most common reasons are:

• The applicant’s credit does not meet the requirement for the type and size of the bond being requested.
• The financial statements do not meet the underwriting criteria for the type and size of the bond being requested.
• The applicant does not have the necessary experience for the type of bond needed.
• The type of bond and/or size is outside the carrier’s appetite.

Most surety companies are very selective and would not approve a surety bond unless the applicant meets the underwriting criteria for the bond written.

We specialize in providing solutions to those hard to place accounts. Applicants who have been denied a surety bond in the past.

We work hard on trying to obtain an approval and rarely deny a surety bond. If your credit is less than stellar or your financial statements do not meet the surety underwriting guidelines, we have specialty programs for you.