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Surety Bond Information
Surety Bonds: Financial Assistance for Contractors
Regardless of size or sector, all businesses should prioritize establishing and maintaining trusting relationships with clients and customers. Earning a positive reputation not only helps retain your existing business partners but also helps to secure additional opportunities. With that in mind, your organization should make concerted efforts to protect the financial interests of both yourself and your clients. One way to do this is by acquiring bonds.
How Do Bonds Work?
Bonds provide what may end up being a critical financial safety net for companies and their clients. These investments can provide financial relief for various parties if a deal, contract or other business operation fails to come to fruition as planned. There are several types of bonds that may be appropriate for your organization, including surety bonds.
Surety bonds are a type of bond that provides financial security for parties that enter into a contract with each other. These investments provide assurance if a party involved in the agreement is concerned about another’s ability to honor the arrangement. In general, surety bonds involve the following three parties:
· The obligee (e.g., the owner of a construction project) decides if the principal must purchase surety bonds.
· The principal (e.g., a contractor) is responsible for purchasing surety bonds if required to do so by the obligee.
· The surety (e.g., an insurance company) underwrites and maintains the surety bonds purchased by the principal.
A surety bond acts as a binding agreement between these three parties and ensures that the obligee will have a means of recouping financial losses if the principal fails to fulfill their contractual obligations. If the terms of a contract are not met, these bonds allow the surety to provide compensation to the obligee. The surety may then seek repayment from the principal.
Common surety bonds may include the following:
o Bid bonds
o Performance bonds
o Maintenance or warranty bonds
o Payment bonds
o License and permit bonds
o Court or judicial bonds
o Fiduciary or probate bonds
o Public official bonds
o Miscellaneous bonds
Get the Right Bonds
With expertise dating back to 1938, the agents at Lakenan Insurance are well equipped to assess your circumstances and needs and help your business invest in bonds that can protect its finances and future. Contact us today to get started.