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3 Rules About Surety Bonds That Everybody in Canoga Park Needs to Know

3 Rules About Surety Bonds That Everybody in Canoga Park Needs to Know

A surety bond is essentially an agreement that ensures the recipient of services will successfully, properly, promptly and fully pay off the debts that they run up. One of the most common examples of such bonds comes in the field of construction. A government hires a company to complete a highway expansion contract. The service provider regularly pays dues for financial protection against getting sued as a result of not being able to complete projects on time or in full. Another company known as the surety offers to compensate the obligee, or the entity receiving such services. Let’s learn a little more about surety bonds.

They Aren’t Very Expensive

Assume that the completion of the aforementioned highway construction services is worth $1,000. If the company that was awarded the contract chooses to pay a surety for its services in backing up what value that the builder doesn’t provide, it might only have to end up forking over roughly $10. That’s because surety bonds can go for as little as 1% of the bond value.

Here’s How These Bonds Are Paid

If you’ve paid attention, a surety bond likely seems similar to an insurance policy. However, rather than having to be paid off every month in the form of monthly premiums, surety bond premiums are typically only paid once. However, in some cases, depending on the specific agreement, a bond could be on the hook to be renewed on an annual, biannual or perpetual basis.

Issues Are Paid For by the Principal

When it comes to a surety bond, any issues that arise from them have their claims paid by the principal, which would be the builder in the above examples. This is similar to paying the deductible on an insurance policy claim. Further, just like insurance companies fork over policy payouts when triggered, sureties do the same following the payment of claims by principals.

Turn to our professionals at JR Olsen Bonds & Insurance Brokers, Inc., in Canoga Park to understand more about surety bonds. You can contact our experts and check out our services at.

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