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Surety bonds can be broken down into three major categories:contract bonds, court bonds and commercial bonds. Contractor Licensing Bonds are your most common types of Bonds held by contractors, this insures the Contractor in the event that they are unable to finish the task, the Bond company will pay someone else up to the bond amount to finish the job.
Bid bonds can also be required when putting bids on larger jobs, typically these vary in price from 1-12% of Bid amount.
Bonds are a recommendable coverage that everyone in the construction industry should have if they are performing any work.
The surety is the entity who will be insuring the principal of the obligations referenced in the bond.
As mentioned above, the obligee is the company, person or government agency that is requiring the bond. They are the party of a surety bond to whom the principal is guaranteeing they will fulfill their obligations.
The principal is the person or company that applies for a bond and purchases it.
Indemnity is the compensation for a loss or a restoration to the approximate financial condition occupied before the loss occurred.
What does it mean to be licensed and bonded?
Certain professions will require licensure to indicate that they are competent enough and permitted to conduct business in a municipality, county or state in which the license is issued. Many third parties or obligees will require that these companies are also bonded to ensure that the work can be completed as stated and to protect themselves in the event that it is not. When a company is bonded, it means that a surety company has set aside money that is controlled by the state and not the company to pay in the event that the client files a claim against the company.
We work with several Bond companies to make sure that we can always obtain the best pricing as Bonds are uniform in coverage from one company to the next.