Surety bonds are a necessary form of guarantee for small businesses and individual contractors that helps them avoid some liability. Surety bonds come in handy in construction, transportation, and mortgages. Plenty of other industries rely on surety bonds, too, thanks to the level of protection they offer to all parties involved. A traditional insurance policy is a contract between two parties. Alternatively, the protection of a surety bond extends to three parties.
Surety Bonds
If you work in a sector that regularly relies on an external entity to fulfill their duties — for example, a home builder who relies on contractors to complete the job — you should know how to take advantage of surety bonds.
Understanding Surety Bonds
What is a surety bond? Several types of surety bonds, including a contract surety bond or a commercial surety bond, all function similarly. The aforementioned three parties — the surety, the principal, and the obligee — all agree with the fulfillment of a contract. A surety means that the insurance company will guarantee fulfillment of an obligation. It ensures that the principal is the party who must complete the responsibility. Also, the obligee is the party contracting the work in question. This type of guarantee minimizes the risk of unfinished work and ensures that the obligee is protected from losses if an obligation is not met adequately.
Surety Bond Producers
You might be wondering — who underwrites and produces a surety bond policy? Surety bond producers are specialists who write and issue surety bonds to businesses, contractors, and other professionals who may need a guarantee. Producers must have the appropriate licensure in the state they intend to do business in. Additionally, they also must fully understand the industry they issue bonds within. If a producer specializes in surety bonds for the construction industry. For example, they must know the workings of a construction bid. It ensures that the bond issued is appropriate for the job.
Surety Bond Companies
The surety bond company is the insurer who ultimately issues the bond. There are many companies to choose from, but if you’re looking for a surety bond company to bank your next project, there are a few essential traits that you should look for. You must be sure that the producer who underwrites the claim has plenty of experience in the industry you are working in. If you are an obligee, you should also invest in enough coverage to protect yourself from loss if leaders cannot complete the project as expected. If you are the principal, you should invest sufficient coverage in minimizing your liabilities.
About BTC Insurance Services
Founded in 2011, BTC Insurance Services has proudly served Utah businesses with comprehensive and custom-tailored insurance coverages for a decade. We pride ourselves on fostering long-term client relationships with a personalized and hands-on approach and have established a reputation built on quality and transparency. For more information about our products and services, we invite you to contact one of our reputable agents today at (855) 944-3457, or send us a message here.
