Surety bonds are widely misunderstood, yet they are an important part of many industries. These bonds are agreements that are frequently required for certain types of businesses, or can be in the best interests of those businesses. This type of bond serves as a subset of insurance policies, ensuring that something will happen. For example, surety bonds frequently ensure that all legal obligations will be met by a business owner.The following information is provided to answer all of your questions and keep you up to date on the most recent surety news.
Three Party Agreement
Think of a surety bond as an agreement made between three parties and related to an industry. The surety makes a financial guarantee to the obligee that the principal will meet obligations while adhering to all relevant laws, including at the state, local, and federal level. The principal is usually a business owner and is the person that needs to present the bond. The obligee is the party that requires the principal to complete the surety bond, such as the state or city. The surety is the company that issues the bond for a premium and guarantees that the principal will follow through.The surety bond indicates that the principal is financially well-off enough to take care of relevant claims. If the principal cannot complete their obligations, then the surety must step in and do so. They also serve as a payment bond, as the surety may be required to pay financial compensation for a claim made by the obligee. The bond protects the rights of the obligee as well as the principal.
Extended Credit by the Surety
In some ways, the process of surety bonds is the surety extending credit to the principal. The surety provides credit or proof that the principal will complete the action or meet the obligations that the obligee requires. This essentially gives the principal credit in the form of trustworthiness.In many cases, the principal would be unable to proceed with their business plans without this credit.
Examples of Surety Bonds
As you explore surety news, it can be helpful to better understand the process via examples. Some types of industry require business owners to have these bonds to protect the rights and payments of the public, as well as to protect the companies themselves.
Construction bonds mentioned in the news protect the owner of the project from liability or financial loss when they use contractors. The construction owner is the obligee who wants a guarantee that the contractor finishes the project according to the contract specifications and will appropriately pay subcontractors and supplies for work on the site Construction surety bonds can include site improvement, subdivision, construction, performance, payment, and bid bonds.
Insurance Broker Bonds
Insurance broker bonds ensure that licensed brokers operate according to laws and act in an ethical manner. The obvious use of this bond is to protect consumers against potential harm from the broker’s actions. It is news to some people that it also guarantees that the brokers are able to account for premiums they collect for companies.
Medicare bonds are also called DMEPOS bonds for durable medical equipment, along with prosthetics, orthotics, and supplies. These bonds are required for any business that will sell these items and bill Medicaid or Medicare. Although rare, some suppliers can get exemptions but the minimum is a $50,000 surety bond.
Mortgage Broker Bonds
Brokers, bankers, and lenders involved in selling and buying in the property industry must have mortgage broker bonds in most states. This surety bond protects consumers against illegal practices and fraud while guaranteeing that the broker operates in accordance with local laws. The news is that this type of bond may protect consumers as well as mortgage providers.
Auto dealerships that are licensed must also have auto dealer bonds while many states legally require health clubs to have health club bonds. There are also notary bonds frequently required for Notary Publics.
Because premiums are largely based on risk and creditworthiness, it is common for certain bonds to require credit reviews. This is not always the case, so it is possible to get a surety bond without a credit check. However, principals looking for sureties should be prepared for this step to take place.
Credit Reviews Are Soft Pulls
In cases when credit reviews are necessary, they will be a soft pull. As such, this type of credit check will not impact the credit score, which is good news.
How ACS Can Assist
No matter how much news you read, these bonds are frequently challenging for the average person to understand thanks to the use of legal language. It tends to be easier for most people to have a surety bond broker arrange the bond for them, as this avoids any confusion regardless of industry.American Contracting Services, Inc. has been a Surety Bond Broker since 1998 and provides clients with the combined experience of 125 years. Using All Commercial Surety (ACS), the online platform, allows you to have easy access to fast turnaround times and competitive rates.ACS is licensed across the country and has been appointed by 25 surety companies. This allows ACS to help offer principals a range of solutions and makes it easier for them to find the best solution for your given needs. As a small organization, American Contracting Services, Inc. always does its best to help customers feel like family.By specializing in surety bonds, ACS has been able to build up even more experience since 1998, along with strong relationships with surety companies, the latter of which helps principals find offers that fit their needs. Our website includes more information about our services to business owners and the public.
Before proceeding, you must be a US Citizen to apply. Once full application is received, we will contact you with a quote or request for additional information by email and a follow-up phone call. If you have questions, you may call us at 1-855-965-BOND.