Types of surety bonds and how to obtain them

Jessica

A surety bond is a written agreement using which one party, the surety obligates itself to another party, the obligee. The bond is such that the surety has to answer the obligee for the default of a third party, the principal. There are in general two types of surety bonds. These include:

Contract Surety Bonds: These bonds provide financial security and construction assurance on building and construction projects. Such bonds ensure that the contractor (principal) will be performing the work and pay certain subcontractors, laborers and material suppliers.

Contract Surety Bonds are of the following kinds:

Bid bonds:
These assure that the bid has been submitted in good faith. It implies that the contractor wishes to enter into the contract at the price bid, and provide the performance and payment bonds.
Performance bonds:
It is the performance bond that protects the owner from monetary losses. The losses may occur if the contractor fails to fulfill the terms and conditions of the contract.
Payment bonds:
These assure that the contractor will be paying the subcontractors, laborers and material suppliers concerned with the project.

Other bonds included within this category are the maintenance and subdivision bonds. The maintenance bonds guarantee against defects in the construction and the required materials. The subdivision bonds assure that the contractor will finance the construction of improvements like gutters, drainage systems, etc.

Commercial Surety Bonds: It is through this bond that a principal guarantees the performance of his obligations.

Commercial surety bonds include the following:

License and permit bonds:
These are required by the state law in order to carry out some business, for example, contractors, etc.
Judicial and Probate bonds:
These fiduciary bonds secure the performance on fiduciaries' duties and compliance with court order. These bonds include injunction, appeal, mechanic's lien, etc.
Public official bonds:
These bonds guarantee the performance of duty by the public official for example, treasuries, tax collectors, and notaries.

Other commercial surety bonds are those required by federal government and miscellaneous bonds like lease, guarantee payment of utility bills, etc.

Bond producers known as agents and brokers issue surety bonds. The producers work in agencies specializing in surety bonds or in insurance agencies dealing with surety bonds. It is the surety bond producer who matches a contractor with the surety company. The company should get a license from the insurance department of one or more states. It may be the state where the company operates or in which the obligation that the bond guarantees is performed.

blue · Posted: Mon Mar 06, 2006 10:01 am Post subject:

Actually the surety bond in a project ensures completion of the project even if the contractor fails to perform successfully.

Guest 0.10 Dollars($)

I heard of another one called Ancillary bond.

These are incidental and essential to the performance as per the contract.

Also, there is one Auto dealer bond under commercial bonds which gives protection to the public from any probable illegal actions of the dealer.

This bond needs to be obtained before the licensure.

Thanks

jameshogg · Posted: Mon Mar 06, 2006 10:25 am Post subject:

Like to mention about Mortgage Broker bonds or Mortgage Surety bonds. This bond is required by the state law for a mortgage broker license.

The surety bond programs are administered by the FMS for the federal government for companies who want to -

Write or reinsure federal bonds.
Get recognized as an Admitted Re insurer for the companies.

James

ckalvesmaki · Posted: Tue Mar 07, 2006 6:57 am Post subject:

That varies on a state to state basis......

mike · Joined: 21 Jan 2008 Posts: 3 1.95 Dollars($)

There are literally thousands of different surety bond types. The mortgage broker, auto dealer, etc. are all license and permit bonds, a commercial bond type.

The bonds are in place to protect the public. They guarantee that the bonded company/individual will perform per the terms of their license. The Surety Bond forums are a good spot to go for any specific questions, but I will be happy to lend my expertise to any questions here as well =)

mike · Joined: 21 Jan 2008 Posts: 3 1.95 Dollars($)

Also, if anyone has any questions on each states requirements feel free to ask. I can share amounts, what states are difficult to get bonded in, and other requirements.

I would post for all states, but then I would be here all day! Let me know if anyone wants to know about any specific state.

sara · Posted: Mon Jan 21, 2008 11:26 pm Post subject: RE:

Hi Mike,

Seems you are new to this community.

Well, hope that you like it. By the way, if you feel like saying something more about, so that others get to know who you are...you can share it with us at http://www.mortgagefit.com/introduce-yourself-3.html .

Hope you'll enjoy visiting the forums here.

Take Care

0.10 Dollars($)

Sara, thanks for the warm welcome!

See you on the forums Wink

mike · Joined: 21 Jan 2008 Posts: 3 1.95 Dollars($)

whoops! forgot to login. Any mods around to delete that for me? Smile

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