Frequently Asked Questions

What is a surety bond?

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A surety bond is a legally binding contract between three parties: the Obligee, the Principal, and the Surety Company. It is important to note that a surety bond is not the same as insurance; it functions more like a line of credit that guarantees an obligation will be met.

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Who are the parties involved in a bond?

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• The Obligee: The recipient of the obligation. This is the party requiring the bond (see below).

• The Principal: The primary party or applicant who must perform the contractual obligation.

• The Surety: The company that assures the Obligee that the Principal can perform the task.

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Who requests a surety bond?

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The Obligee requests the bond. In most cases, the Obligee is a local or state agency (or a court) that requires the Principal to obtain and pay for the surety bond to operate legally or prove legal responsibility.

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Who is responsible for purchasing the surety bond?

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The Principal (the applicant) is responsible for purchasing the bond.

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Is the "Bond Amount" the same as the "Penalty"?

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Yes. "Penalty" is simply another industry term for the total Bond Amount.

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What is an Indemnity Agreement, and who typically signs it?

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An indemnity agreement is a legally binding contract between the Principal and the Surety Company. It guarantees that the Principal is responsible for repaying any claims they are liable for if the Surety pays out, up to the full bond amount (including legal costs).

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• Who signs: Any person that owns 10% or more of the business is required to sign.

• Spouses: In cases where assets are shared, spouses may also be required to sign

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How is the cost of a bond determined?

 

The cost (premium) is determined by the risk of the bond and specific criteria of the Principal.

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• Typical Rates: Premiums normally range between 1.0% – 2.0% of the total bond amount requested by the Obligee.

• Example: If a bond is $15,000, the premium would typically be in the ballpark of $150 to $300.

• Note: Rates vary based on several factors and differ from one bond type to another.

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How long does a bond stay in effect?

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Most bonds are written for a one-year term and must be renewed annually. However, options vary:

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• Multi-year: Some bonds are offered for 1, 2, or 3-year terms (this option will be shown when you apply).

• Term Bonds: Some bonds are valid only for a set period with a specific end date (typically less than a year), such as a Construction Bid bond.

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Will my credit be checked?

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Yes. Submission of the bond application constitutes permission to obtain consumer information to determine bonding eligibility for the first term and succeeding renewals.

• Impact: Most credit inquiries are "soft" checks and generally will not appear on your report or negatively impact your credit score.

• Privacy: All information is held in the strictest confidence.

• Note: Credit is not necessarily required for all bond types.

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What is the refund policy?

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Once a surety bond is fully executed, it is non-refundable. No refund or return is available upon any completed bond purchase. If you accidentally purchase the incorrect bond type, please contact us, and we will assist you in obtaining the correct one.