Surety bonds throughout the United States with offices in Lexington, KY, Barbourville, KY, Florence, KY, Whitley City, KY, Winchester, KY, and Cincinnati, OH. We are licensed and appointed in 48 states so we have the ability and expertise to help you no matter where you may live or work.
A surety bond is a great way to guarantee that a large investment in a project is not lost—whether or not the work gets done. This type of guarantee is especially common in the construction industry, and is often utilized for government contracts.
A surety bond is an unusual form of insurance in that one person or organization pays for it, while another receives the benefit.
It’s easier to understand with an example. Imagine a contractor is building a new office building for a government agency. The agency naturally wants a guarantee that the taxpayer won’t be left out of pocket if the contractor fails to deliver the offices as promised.
The answer is a surety bond. The contractor pays a premium to the Insurance (Bonding) Company to purchase the surety bond. Should the contractor default or not fully perform the obligations of the contract, the Bonding Company guarantees the contract either by completing the agreed contract with another contractor or makes financial compensation to the government agency; who is the Owner of the Contract (Obligee). The big difference between this and ordinary insurance is that the Bonding Company can and will go after the contractor to get this money back (this is call Subrogation Rights). The point of the surety bond is that the Obligee gets the assurance that it won’t have to chase after the money itself.
While government agencies commonly insist on a surety bond, it can work with any two organizations. The one that purchases the surety bond is “the principal,” while the one that gets any payout is “the obligee.”
If there’s anything else you need to know about surety bonds, contact us today.
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