Surety bonds have a long history, and it believes the bond was used in Mesopotamia. A business or person should understand the ramifications of use surety bond before deciding to utilize the bond. There are few benefits offered by using the surety bond, but it will only be beneficial if the correct bonds are used for the correct situation. A business or individual will be able to obtain a surety bond from agency licenses to issue surety bonds. The product of the requirements and licenses agencies must meet to issue surety bonds will vary from state to state.
Understanding The Three Parties Involved For Surety Bonds
The principal, oblige, and surety are the three parties needed for a surety bond. The principal has a requirement of providing the bond. An example of the principal would be the person applying for a permit or license. The oblige is the party with the requirement for a bond. By having the bond, the oblige is providing itself protection. An example of oblige would be the owner of a project that would require a bond. The surety is the insurance company, and if a claim has to be paid by the insurance company or surety, the surety would be reimbursed by the principal. Any surety bonds scottsdale az will beneficial to all parties involved. A surety bond is an insurance product, but it is underwritten like a loan. A surety can be considered a professional cosigner that acts as a guarantee for the performance by the principal.
Benefits of Using A Surety Bond
Many businesses and individuals use surety bonds to obtain a variety of benefits such as:
- Important to customer relations
- Provides protection to stakeholders
- A good defense against false Claims
- Coverage after a job Is completed
The use of the surety bonds will provide an advantage of improving customer relations. It provides confidence that a company is financially stable because a third party guarantees financial stability. It helps anyone involved by having a surety bond because it ensures the parties will be paid for their services rendered. An example would be a supplier of concrete for a construction project would have some confidence they would receive payment when a surety bond would be used. The surety bond is a good defense for companies who may make a false claim. When signing the surety bond, all parties involved are aware of their responsibilities, scheduling, payment structure, or anything else because it is clearly stated and by signing it acts as an agreement. There is a clear understanding of expectations and protection is created for false claims that may arise later. The surety bond does not in upon completion of the building phase of the project. If the project requires maintenance, the surety bond may be in effect for up to a year. It helps in case there may be problems that arise during the maintenance phase and repairs have to be made. The surety bond provides confidence and helps builds trust. In some cases, it may help a business offer more affordable rates because clients have more confidence and trust created by the use of the surety bond.