Protection Against Losses
La Porte Insurance Agency offers a wide range of business insurance options to protect providers and customers. In some contractual instances, a surety bond is required. Read on to learn what these bonds are and how the agents at La Porte Insurance Agency can help you find the best coverage for your needs.
What is a Surety Bond and Why Would You Need One?
If you are entering into a contractual agreement in a construction or contracting industry, you may be required to purchase a surety bond. On a basic level, surety bonds are used as a binding force between three parties in a legal agreement. Those parties include the roles of the principal, the obligee, and the surety. A principal is usually a professional or a business that purchases the bond. The obligee is typically the government agency that requires the principal party to purchase the bond. The reason a surety bond is purchased is so that the principal in a given agreement is held financially responsible for following certain laws and regulations expected by the obligee party.
The obligee uses the bond to regulate an industry and protect consumers from financial loss. The surety party is the insurance company that guarantees the bond. That’s us! Our role in this agreement is to back up the principal when they claim that they are going to follow all the regulations required by the obligee.
However, if the principal does not fulfill the terms of the bond, the obligee can make a claim against the bond to collect reparations for damages. If the claim is considered to be valid, the surety is responsible for reimbursing the obligee due to the fault of the principal.
Surety bonds are often required from businesses and people who provide services to customers in traditionally risky markets. Most surety bonds fall in one of two categories: commercial bonds and contract bonds.
La Porte Insurance Agency Provides Commercial Bonds and Contract Bonds
Commercial bonds are normally purchased by business owners to ensure that people will do their job according to the licensing standards and industry regulations. That kind of bond would apply to travel agents and automotive dealers.
Contract bonds are used in construction. They guarantee that construction workers will fulfill contractual obligations and stay on schedule so that project owners don’t lose money on their property.