Surety Bonds are not insurance.
Surety Bonds are an extension of credit provided by a surety
company in order for an individual or business to
conduct their affairs.
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Surety Bonds guarantee that the purchaser will successfully
perform some specified service. They are generally acquired
because of a government or regulatory requirement. They
provide compensation in the event that the purchaser fails to
perform the specified service. Equally important, if the
purchaser fails to perform, he or she will be unable to
provide a bond in order to continue to provide like services.
In the event that a claim is presented to the Surety Company,
the Principal (purchaser) will be officially contacted to pay
the claim. If there is no response from the Principal to
settle the claim and the claim is paid by the Surety Company,
then the collection procedures may be implemented.
Surety bonds are divided into two
categories: commercial surety and contract (construction)
surety.
Commercial surety guarantees that the principal will
honor obligations to pay certain sums of money under defined
agreements or statutory terms.
In the construction industry, contract surety bonds
guarantee the project owner that the contractor will live up
to the terms of the contract. If the contractor fails to
finish the bonded work, the surety company finances the
completion of the project by the contractor or by a
replacement. Contract surety bonds include performance
bonds, which protect the owner from financial loss if the
contractor fails to meet its obligations, while payment bonds
guarantee that the contractor pays workers, subcontractors and
suppliers.
Portnov Financial and Insurance Services
works with companies recognized as leaders in the surety
industry with expertise in a variety of bonds. So, give us a
call for all your surety bonds needs.
