You can now apply online for a Performance Bond - it only takes three (3) minutes! (Yep, we timed it.) Click here:
Or you Can download our Express Performance Bond Application (click to download form)
- Complete the form and email to [email protected]
- Be sure to include the Contract and Notice of Award letter (bid specs from the obligee).
- Send the bid results if you have them
What is an Assurance Bond?
An assurance bond is a type of surety bond that provides a guarantee to the obligee that the principal will fulfill their obligations as specified in the bond. This legally binding contract involves three parties: the principal, the obligee, and the surety, which is typically an insurance company. The primary purpose of an assurance bond is to protect the obligee from financial losses in case the principal fails to meet their contractual obligations. By offering this guarantee, the surety bond ensures that the obligee can have confidence in the principal’s commitment to the contract.
Types of Assurance Bonds
There are several types of assurance bonds, each serving a specific purpose:
- Performance Bonds: These bonds guarantee that the principal will complete a project or task as specified in the contract. They are commonly used in construction and other industries where project completion is critical.
- Payment Bonds: These bonds ensure that the principal will make payments to subcontractors, suppliers, and laborers as required by the contract. This type of bond is essential for protecting those who provide labor and materials.
- Commercial Bonds: These bonds guarantee that the principal will comply with the terms and conditions of a commercial contract. They are often used in various business transactions to ensure compliance with regulatory requirements.
- Fidelity Bonds: These bonds protect the obligee from losses due to dishonest or fraudulent acts by the principal. They are commonly used by businesses to safeguard against employee theft or misconduct.
Benefits of Assurance Bonds
Assurance bonds offer several significant benefits to the obligee:
- Financial Protection: The assurance bond provides a guarantee that the principal will fulfill their obligations, protecting the obligee from potential financial losses.
- Reduced Risk: By providing a third-party guarantee, the assurance bond reduces the risk for the obligee, ensuring that the principal will meet their contractual commitments.
- Increased Confidence: The presence of an assurance bond can boost the obligee’s confidence in the principal’s ability to fulfill their obligations, fostering a more secure and trusting business relationship.
How to Obtain an Assurance Bond
To obtain an assurance bond, the principal must contact a surety company and provide the necessary information and documentation. The surety company will evaluate the principal’s qualifications and, if approved, issue the bond. The principal will be required to pay a bond premium, which is typically a percentage of the bond amount. Additionally, the principal must agree to reimburse the surety company for any claims made under the bond. This process ensures that the surety company is protected while providing the necessary guarantee to the obligee.
Assurance Bond Definition Chart for Surety Bonds
| Name | Description | Link |
|---|---|---|
| 1. Definition of Assurance Bond | An assurance bond is a type of performance surety bond that provides assurance, or guarantee, based upon another underlying agreement. An insurance bond, on the other hand, is a specific type of risk management tool that functions differently than an insurance policy. | Extra Information |
| 2. U.S. Bonds | In the United States, an assurance bond is usually referred to as a performance bond, payment bond or a . | Extra Information |
| Security Bond | See more here about the definition of a surety bond |
See more about What is a Surety Bond here
