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A surety bond is a type of guaranty that involves a claim by one party, the surety, to assume responsibility for the debt obligation of a borrower if that borrower defaults. This is an agreement which is often crucial for individuals and industries navigating financial duties, protecting them from potentially devastating losses.

surety bond is a bond type, often specified by government agency statutes, that comprises a claim by one party, often insurance companies or other businesses operating in various industries, to assume responsibility for the debt obligation of a borrower - be it a constructor in a construction project or an executor or administrator of an estate - if that borrower defaults. This widely accepted agreement ensures that potential losses are mitigated and provides a safety net for businesses undertaking many types of projects, ensuring protection against fraud and honoring commitments made to customers.

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Or you Can download our Express Performance Bond Application (click to download form)

  1. Complete the form and email to [email protected]
  2. Be sure to include the Contract and Notice of Award letter (bid specs from the obligee).
  3. Send the bid results if you have them

What is the Definition of a Surety Bond?

Surety bonds are used for a variety of categories. These include licenses and permits that the government requires for businesses. Others cater to construction projects and contracts, such as building a shopping mall. A third major category caters to court situations, for example, when an administrator initiates a probate action.

What are Surety Bonds Used For?

Surety bonds are used for several categories.  The first kind is for licenses and permits.  These are bonds that the government requires for companies to get in order to ensure that the government gets paid taxes.  The second kind is for a contract, such as building a shopping mall.  The third major kind is for court, such as when a probate action is filed.

What Is Surety?

A surety bond company provides surety on behalf of another group, essentially guaranteeing the obligations of the principal party. This bond, also known as a performance bond, plays a significant role in the construction industry particularly, protecting all parties in a variety of contract arrangements.

Surety Bond - The logo shows a handshake between two persons and a contract document in an off-white colored background. This imagery symbolizes the peace of mind surety bonds provide to businesses, contractors, and their customers.

Performance and Payment Bonds, typically used in construction projects, assure that the Obligor (that is, the party getting bonded) will fulfill their contractual obligations hence, reducing the risk of project failure.

See our article on What is a surety bond?

What is the difference between a surety bond and insurance?

A payment bond, another bond type, also ensures that all subcontractors and suppliers for a construction project are paid by the Obligor, giving security to all involved parties.

Definition of a Surety Company

The security bond is a specialized type of surety bond and can provide a significant amount of protection and coverage to the owner of a project. This is crucial to avoid project failure and to ensure regular work is being carried forward. All federal jobs are mandated to have a surety bond pursuant to the Miller Act. Most states and municipalities have passed similar laws and regulations, known collectively as 'little miller acts', so it becomes a universal requisite in the construction industry. A contract surety bond essentially acts as insurance from the project owner against unexpected events and protects the public interests and suppliers involved.

Surety bond in construction

Surety Bond - The logo shows a two persons hand shaking and a contract document in an off white colored background.

For a construction contract, the contract surety bonds last until the contract is completed (plus some time for any maintenance period on the contract), providing a premium level of security for project owners. For court bonds, they last until the court matter is concluded, while most permit and license bonds tend to retain their validity for a year.

Indeed, there are thousands of different types of surety bonds that cater to every possible business need. These range from contract bonds, which specify the bond amount and rate based on a predetermined bond contract, to customizable bond forms tailored to unique business practices. Both small business owners and larger agencies may find suitable options among our offerings. Surety bond companies like ours strive to meet all the requirements outlined in the specifications of these bonds. Please see our page here for accessing a comprehensive list of available options.

Get more insights about a surety bond in California by clicking here. Learn more about how the bond amount and rate may vary based on local business practices and the specifications laid out by state agencies.

Refer here to gain a practical understanding of our surety bond example. It includes the explanation of the bond contract, the contract bond, and the bond form used by reputable surety bond companies.

What is a Security Bond?

We also specialize in Bid Bonds, Performance, and Payment Bonds (construction bonds), along with other Warranty and Maintenance Bonds. Each of these options requires varying, specific requirements to be fulfilled, demonstrating the diverse range of our practices.

How long is a surety bond good for?

The Definition of a Security Bond is a surety bond that is secured by some sort of collateral. In many surety bond cases, as managed by surety bond companies, there is not any collateral required. Thus, the surety will simply issue the bond, like a performance bond or payment bond, based on the financial standing of the underlying entity being bonded. However, in a security bond, there is collateral that is required, offering an added layer of confidence for the project owner. This collateral cannot be part of the job that makes up the contract underlying the performance and payment bond. Instead, additional collateral, or "security," is required, and this collateral is what is held safeguarded.

Types of surety bonds

In the name of security, some sureties ask for an irrevocable letter of credit. This acts as purely liquid security for the underlying bond. Additionally, some sureties prefer funds control, which facilitates them to write the underlying performance bond. These funds control practices can influence the bond amount and rate in the bond contract.

To make it easier for our valuable clients, we have our bond application form readily available online. Here, you can find both a contract bond and bond form, making your experience with surety bond companies smoother and more efficient.

Search for more details, including specifics on bond amount, rate, and requirements as determined by local agencies:

For enhanced convenience, we provide an Instant Bond Application for Performance Contract Bonds. This application includes the bond amount and rate specified by your bond contract and the accompanying bond form.

There are thousands of different types of surety bonds.  See our page here for only a few of the ones that are offered.

We also do Bid Bonds, Performance and Payment Bonds (Construction Bonds), and other Warranty and Maintenance Bonds.

Security Bond Definition

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Some sureties ask for an irrevocable letter of credit. This is purely liquid security for the underlying bond. In addition, some sureties will want funds control so that they can write the underlying performance bond.

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