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Questions about Bonding Companies
As the leader in providing surety bonds (bid bonds, construction bonds, etc.), it is not uncommon that we get questions from people wanting to know exactly what a bonding company is, so we thought that we’d give you some information that could be worthwhile.
Bonding companies typically provide several lines of insurance, such as Errors & Omissions (E&O) insurance or Property & Casualty insurance as well as bonds.
Bond side of the business
We are going to focus on the bond side of the business as this is what the bonding company is all around. A bond’s formal name is surety bond. It is written by an insurance coverage company via an insurance coverage firm. Swiftbonds, as you’ve probably already guessed is a bonding insurance coverage agency. Just like all insurance coverage firms, there is a need for a certified insurance policy representative that helps the company. We were selected to help service bonds by the insurance coverage company that underwrites the bond.
A surety bond is a contract among three separate parties: The principal (that’s you, the contractor), the obligee (the general contractor or agency), and the surety (the insurance company that makes certain that the principal's commitments will be done).
Pursuant to this arrangement, the surety agrees to uphold the contractual assurances made by the principal if the primary obligor fails to uphold its guarantees to the obligee. In plain language, if you are unable to finish a job, the insurance company can either get someone else to finish or pay damages, etc.
The principal pays a premium for the bonding company's financial stability in the form of a surety bond. If there happens to be claim and it turns out to be a legitimate claim, the surety will pay it and, after that, resort to the principal for repayment of the claim and any kind of lawful charges sustained.
Can anyone be a bonding broker/agent?
No. A bonding company will not contract with just anybody off the street. A bonding agency is truly an insurance firm and should be staffed by accredited Insurance policy Agents. Bonding Companies are governed by the very same strict specifications as all insurance firms and follow state statutes established for insurance policy business.