SURETYSHIP

A practical guide to surety bonding.

The Surety Bond: A Primer

Although surety is an ancient concept, its prime mission can be stated simply: performing a service for qualified individuals whose affairs require a guarantor.

In the United States, surety guarantees have been issued by corporations for over a century. These corporate sureties are large financial institutions. They have the necessary capital to make numerous commitments in form of surety bonds.

Because insurance companies issue many surety bonds, some people think that insurance and surety bonds are the same thing. While there are similarities, there are also major differences. Insurance comes with expected losses. Therefore, the insurance company pools the risk with a large number of applicants so the risk is shared. Covered individuals are expected to pay their deductible, but not to repay the actual loss. Surety bonds are not expected to incur losses, which is why sureties like to cover qualified individuals. If the surety does need to step in and pay the obligee or third party for any losses, the covered individual or principal is then excepted to repay the surety for those losses.

What is a Surety Bond?

A bond guarantees the performance of a contract or other obligation. Bonds are three party instruments by which one party guarantees or promises a second party the successful performance of a third party.

1.The Surety–Is usually a corporation which determines if an applicant (principal) is qualified to be bonded for the performance of some act or service. If so, the surety issues the bond. If the bonded individual does not perform as promised, the surety performs the obligation or pays for any damages.

2.The Principal–Is an individual, partnership or corporation who offers an action or service and is required to post a bond. Once bonded, the surety guarantees that he will perform as promised.

3.The Obligee–Is an individual, partnership, corporation, or a government entity which requires the guarantee that an action or service will be performed. If not properly performed, the surety pays the obligee for any damages or fulfills the obligation.

The example below illustrates how a surety bond works:

Joe, the principal, has promised someone (the obligee) that he will do something. If Joe fails to perform as he has promised, financial loss could result to that person.

Consequently, the obligee says to Joe, “If you can be bonded, I’ll accept your performance promise.” Joe goes to surety and ask to be bonded.

After the surety is satisfied that Joe is qualified and will live up to his promise, it issues the bond and charges Joe a “premium” for putting its name behind Joe’s promise.

Joe is still responsible to perform as promised. The surety is responsible only in the event that Joe does not fulfill his promises.

HTML Table Generator

Type of Bond	Description
State License and Permit Bonds	Bonds that are required by the state. They are typically required when individuals file their license information.
Contract (Fast-Track) Bonds	Bonds that are required when an individual obtains a contract with a public obligee. These requests are typically involving work with states, counties, cities, etc. There are three main types of bonds that can be required: 1. Bid Bonds – typically required in order to bid the job. They are typically in the amount of 5% or 10% of the contract price. Obligees will require bid bonds be included with the bid package and proposals. 2. Final Payment & Performance Bonds – bonds that are required once an individual has been awarded a job with a public obligee. The bond is in the full amount of the contract price and guarantees the individual will faithfully perform the duties of the job and pay subcontractors for their work. 3. Stand Alone Maintenance Bonds – bonds that are required by public obligees after a job has been completed. The bond guarantees the individual will maintain the work for a period of time, typically one to two years.
Dishonesty Bonds	This coverage can be obtained through Dishonesty A or Dishonesty B and protects the employer against dishonest acts committed by employees.
Janitorial Services Bonds	This coverage is typically for cleaning services and protects employers from dishonest acts of their employees. This coverage covers losses to customers’ property only and does not cover the employer’s property.
Notary Bonds	Notary bonds are required by a notary public to protect the consumer (notary purchaser and document recipient) from fraudulent document-signing. The bond guarantees faithful discharge of the duties of office. The obligee is the state for the protection of the public.
Notary E&O Policies	This type of insurance policy covers errors & omissions made by a Notary Public. We offer two types of policies, Group and Individual: 1. Group coverage is typically purchased by an employer to cover the notary duties performed by their employees. The employer is automatically covered, and additional notaries hired during the policy period are automatically covered. 2. Individual policies are written for the same period of time as the notary commission in the state where that individual is appointed as a notary. When possible, we try to have the notary E&O policy dates align with the individual’s notary commission dates. However, this is not a requirements. With both the individual policy and group policy there is no deductible and are written on an occurrence basis, which means that the error or omissions must have occurred during the policy period or life of policy. In the majority of states, defense costs are included within and not in addition to, the limit of coverage.

Bond Requirements

Following are the bond requirements for most common bonds other than notary bonds. If you need a notary bond, please click here. If you do not see what you are looking for, give us a call!

Once you select the bond that meets your needs, click on the button in the left column for that bond, and it will take you to an application form. Please read the instructions carefully, and complete each section. If you have any problems or questions, call us. We will be happy to walk you through your application.

When we have received your bond application, we will get back to you quickly to complete your transaction. If you do not hear from us in 2 business days, there may have been a problem with the transmission. Please call and check with us.

Contact Us: (405) 235-5319, Ext. 3016. Kimberly@walkercompanies.com 121 NW 6th Street, Oklahoma City, OK