A surety bond is often required by an "Obligee" for the purpose of ensuring that laws are complied with and for the performance of duties. You are considered the "Principal" and have the obligation to comply with laws for whatever the purpose of the bond is for. The "Surety" guarantees that the principal can fulfill the obligations.
In most cases, a surety bond is required by the Obligee (the entity requiring it) that specifies certain conditions that must be met such as laws, honest and ethical performance of duties, contract obligations, etc. Not all surety bonds have the same wording, bond amount, duties required, or laws to be met. Surety bonds may be required in order for a license or permit to be issued in order to provide services, operate a business, drill wells, etc.
For instance, a motor vehicle dealer surety bond is different for each state and is a requirement for dealerships to operate a business. However, not all states have the same dealer license specifications.
Courts require surety bonds for probate such as for administrators, guardianships, conservatorships and the bond ensures that "you" (the principal) will manage the estate, act as a fiduciary and fulfill the duties required by the court.
Contractors bidding or already awarded a contract may need to have a payment and/or performance bond to ensure that the obligations of the contract are met.
Surety bonds have different levels of risk. You (as the principal) are obligated to fulfill your duties of the bond. However if you fail to comply, a claim may be placed on the bond. If the surety has to pay the claim out, you are responsible for repayment of the claimed amount (unlike insurance who pays the claim). The higher the bond amount is, the greater the risk is. And, there are many other factors that may make a surety bond risky such as landfill bonds that have EPA requirements, contract bonds that have terms of the contract to be met, oil drilling permits that impacts the environment, etc.
The bond amount required by the obligee varies depending on the type of bond, the duties of the bond, the state and other factors. For instance a mortgage broker in Alabama has a $25,000 surety bond requirement and a mortgage broker in Georgia has a $50,000 surety bond requirement. Each state determines the bond amount they deem necessary to cover a claim should one occur. Surety bond amounts may also increase based on volume of sales, taxes due and other factors that the state has based the bond amount on.
The amount that you pay for a surety bond varies on the bond amount, the requirements of the bond, who is requiring the bond, what the risk of the bond is, and often your personal credit. In some instances underwriting may request personal and/or business financials. Since each situation is unique, the bond amount varies. SuretyGroup.com works with many sureties to get you the best rate possible.
Check out our FAQ page. Should you need or choose to buy a surety bond, buy from us. SuretyGroup.com has been underwriting surety bonds throughout the U.S. for more than 35 years. When you work with us, you enjoy the unique benefit of dealing with a team of highly experienced surety agents with in-house underwriting authority. This allows you to receive competitive, low rates, quick approvals, and immediate bond delivery. In most cases, your bond will be delivered within 24 hours after you apply for it.
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