Sometimes, insurance doesn’t contain the word insurance or policy. That’s the case with surety bonds. When you read that a business presented a surety bond to the city or that your business needs to obtain a surety bond, it describes an insurance purchase. Here at Holmes Insurance Services, we can assist you with the four types of surety bonds when a Youngsville, NC business needs to obtain them.
Surety Bond Defined
The term surety bond or surety bond insurance refers to a legal document that promises a business or organization will complete the task specified in the bond. The bond contract includes provisions that protect the obligee (the government) if the principal (the business owner) named in the documents fails to complete the task or comply with the agreement. The surety or insurer serves as the middleman between the obligee and the principal.
The obligee doesn’t allow the project to start until the principal obtains the surety bond insurance. The policy purchased must contain the following:
- proof of sufficient funds to complete the project,
- professional abilities to successfully complete the project,
- proof of a positive corporate image,
- proof of appropriate business management practices,
- documentation of a positive reputation with financial lenders,
- a proper line of credit.
Once obtained, the principal can alter the surety bond by adding a rider. The available riders for a surety bond include increasing the bond amount, changing the bond’s date or bond terms, and rectifying an error in the original bond.
Types of Surety Bonds
Like most forms of insurance, the surety bond offers a variety of policy types. The term surety bonds insurance refers to the following four types of policies:
- court surety bonds – required before embarking on a civil court proceeding, this bond confirms the financial liability of the parties if they refuse to comply with the court’s orders,
- commercial surety bonds – compulsory insurance that a government requires to protect the public’s welfare against fraud, misrepresentation, and dishonest practices.
- contract surety bonds – used in the construction industry, this bond promises that the contractor will comply with the bond’s terms and that the obligee pays the contractor on time. Each organization obtains its own surety bond.
- fidelity surety bond – ensures an employer offers financial protection to its employees from mismanagement, theft, and illegal activities.
Give Us A Call
Contact Holmes Insurance Services, serving Youngsville, NC, to obtain a surety bond for your business. We offer all four types of surety bonds and all riders.