Surety Bonds – Frequently Asked Questions
A surety bond guarantees the performance of a contract or other obligation. Surety bonds are three party instruments by which one party guarantees or promises a second party the successful performance of a third party. (1) The Surety: usually a corporation which determines if an applicant (principal) is qualified to be bonded for the performance of some act or service. If so, the surety issues the bond. If the bonded individual does not perform as promised, the surety performs the obligation or pays for any damages; (2) The Principal: an individual, partnership, or corporation who offers an action or service and is required to post a bond. Once bonded, the surety guarantees that he will perform as promised. (3) The Obligee: an individual, partnership, corporation, or a government entity which requires the guarantee that an action or service will be performed. If not properly performed, the surety pays the obligee for any damages or fulfills the obligation. To read a more in-depth guide on what a surety bond is, visit our page What is A Surety Bond.
An indemnity agreement is a contract between the surety company, principal, and the obligee. It represents the promise that the principal will follow the rules set out by the obligee. Furthermore, if there is a claim on the bond that the surety must pay out, the indemnity states that the principal will reimburse the surety for the total claim paid out, plus any expenses incurred.
An obligee is an individual, partnership, corporation, or government entity that requires the guarantee that an action or service will be performed. In other words, it is the entity that requires the surety bond.
A bond term is the length of time a surety bond is effective. A surety bond could have a term of anywhere from four months to one year, two years, or five years, etc. The start of the term, or the effective date, typically depends on when you apply for and purchase your bond. Some bonds, however, may have pre-determined term dates.
A surety bond guarantees the performance of a contract or other obligation. If the principal fails to fulfill the contract or obligation, the injured party (claimant) can file a claim with the surety company, against the principal’s surety bond. If the surety deems the claim to be valid, the surety will pay the claimant reparations up to the bond amount. The principal is then responsible for the repayment of the claim amount, plus fees and expenses to the surety.
Working with a reputable surety bonding agency is a great way to get your surety bond for the lowest price. EZ Surety Bonds works with several sureties to find you the best quote and get you bonded quickly. Visit EZsuretybonds to browse hundreds of bonds by state, type, or industry. We provide license and permit surety bonds in all 50 states and offer nearly 3,000 surety bonds that can be purchased quickly online.
A surety bond does not technically “protect” anything in the way you may think car insurance protects you against financial loss in the instance of an accident. Instead, a surety bond guarantees the performance of a contract or other obligation. At best, a surety bond protects the obligee, not the principal. Fidelity bonds such as business services and dishonesty bonds are the exception because there is no obligee. Those bonds typically protect a business from the fraudulent acts of its employees.
The principal or owner of the business is typically the only individual that can sign a surety bond. There are some occasions where an officer or individual of a corporation may be authorized to legally sign documents on behalf of the corporation.
There are hundreds of instances where someone may be required to get a surety bond. Individuals and/or businesses may need a surety bond to fulfill a licensing requirement (e.g., contractors, freight brokers, used car dealers), to protect their company from dishonesty/fraudulent actions by an employee, or to meet court requirements for probate.
Surety bonds are not the same as insurance. Insurance is a means of protection from financial loss. A surety bond guarantees the performance of a contract or other obligation. For instance, renters’ insurance may protect you from damages if your apartment floods. In contrast, if you are the principal on a surety bond and fail to uphold the regulations of the contract or obligation that the surety bond guarantees, a claim may be made against your bond. If the surety finds the claim is valid and pays the claimant reparations, you will be responsible for reimbursing the surety the total claim amount plus fees and expenses.
The price of a surety bond varies depending on the bond type, bond amount/penalty, and (potentially) your credit and personal or business financials. Some surety bonds have a standard rate and can be purchased instantly. Others may require a soft credit check and/or financials. As such, surety bonds can cost anywhere from $35 to upwards of $10,000 and higher.
Generally, surety bonds are not refundable. If you purchased a bond and quickly discover you didn’t need it, the surety may approve a return of premium at a prorated amount. Some bonds, such as court bonds and other contract bonds, cannot be canceled without a release from the obligee.
Surety bonds are typically paid for as an upfront, one-time payment. There is no monthly premium, only the single-term premium quoted to you. Most bonds can be renewed at the end of the bond term if the bond is still required.
No, surety bonds do not have a monthly premium. You pay the full premium quoted to you before the bond is issued. Once paid for, the bond is issued and becomes effective for the length of the bond term or until it is canceled. Some sureties may offer financing options, but this depends on the bond type and surety company.
There are two primary factors to acknowledge when considering surety bonds. The first is the bond amount (or bond penalty), the second is the premium (what you pay). Bond amounts vary by the type of bond and what the specific obligee requires. A bond amount could be anywhere from $100 to upwards of $500,000 and even higher for certain bonds. The premium is then calculated as a percentage of the bond amount. The percentage is either a standard rate or calculated based on credit and/or personal and business financials.
Yes, some surety bonds do not require a credit check and can be purchased instantly at EZsuretybonds.com. If the type of bond you need does require a soft credit check, we work with multiple sureties to get you approved, find you the best quote, and get you bonded within 24-48 hours.
Some surety companies may require collateral as a contingency of underwriting your surety bond. Whether collateral will be required depends on a variety of factors including the type of surety bond you need, your credit, personal and business financials, and the length of time your company has been in business. For instance, lien release bonds may require collateral.
The length of time a surety bond is good for—a bond term—depends on the type of bond. Some bonds have a term of one year from the effective date of the bond, others have terms of two, three, or more years. The effective date may be the same as the date you purchased the bond (i.e., the issue date), or some other date approved by the surety. Other bonds have a set expiration date (i.e., December 31st, annually), so the length of the bond term will depend on when you purchase your bond.
Many surety bonds can be cancelled, however, some cannot. There are three main categories of surety bonds that typically cannot be canceled without additional documents: court bonds, lien release bonds, and some contract bonds. These bonds generally require a release from the obligee to be canceled.
To apply for a surety bond, simply search for your bond at EZsuretybonds.com and follow the steps provided. Fill out the application form, pay for your bond, view your electronic copy, and receive the original bond in the mail (unless it is electronically filed, which is not common). If you have any questions along the way, please email us at Info@WarnockAgency.com or call us at 1-866-546-4605.
A surety will typically send a cancellation notice to the obligee if the bond has not been renewed once it expires, or if the surety declines to offer a renewal quote. When a cancellation notice has been sent out, typically the bond has already been canceled and may or may not be eligible for reinstatement.
How long it takes to get a surety bond varies from agency to agency. At EZsuretybonds.com we pride ourselves on getting you bonded within 24-48 hours if you apply during our business hours. Some bonds you can file with the electronic bond we send you instantly after you pay for your bond; otherwise, your bond will be sent to you in the mail. We offer either overnight shipping for an additional fee or standard shipping for free with the United States Postal Service.
Finding a reputable surety bonding agency that works with multiple sureties will help ensure you get the bond you need for the best value. EZsuretybonds.com is licensed in all 50 states and works with multiple sureties to find you the best quote for the bond you need in.
Claims are handled directly by the surety company. When a claim is filed against your bond, the surety will notify you and allow you the opportunity to resolve it. If the surety incurs no expenses, the claim can be resolved without additional fees charged to the principal. If the claim is not resolved quickly, the surety will investigate and determine whether the claim is valid. If the claim is valid, the surety will cancel the bond and pay the claimant reparations up to the bond amount. The principal is then responsible for reimbursing the surety company for the total amount of the claim, plus any expenses incurred.
Surety bond requirements vary from state to state for every type of bond. There is no “one size fits all” for surety bonding in any state. Therefore, the type of bond, bond amount, and cost of the bond will all vary depending on your specific circumstances.
Yes, the Federal Motor Carrier Safety Administration (FMCSA) requires all freight brokers in every state to obtain a $75,000 BMC 84 Freight Forwarded (ICC Broker) Bond. You must also be registered with the FMCSA and have a designated motor carrier (MC) number.
To bond an employee, typically you would need a dishonesty or business services bond. Dishonesty and business services bond rates are based on the number of employees and the bond coverage requested (from around $5,000, to upwards of $100,000 and higher). The cost can start as low as $100 for a one-year term and increase from there.
Every state has different bonding requirements for car dealers. As such, the bond amount will vary from state to state. Typically, this bond is credit-based, which means the surety company will calculate an individual rate for every application based on several factors (credit, personal/business financials, and/or length of time in business or experience). At EZsuretybonds.com, we quote car dealer surety bonds in almost any state.
Contract and commercial bonds often have different costs. The cost for each type of bond is calculated based on bond amount, the credit and financial stability of the principal applying. Because contract bonds often have larger bond amounts than commercial bonds, you may find that contract bonds can be more expensive. Please note that even though some bond forms use the words “payment/performance,” they may still be considered commercial bonds.
Fidelity bonds are financial guarantees that insure a business and its customers against fraudulent acts committed by employees. Unlike Surety Bonds, Fidelity bonds don’t have an obligee. Dishonesty, business services, and ERISA bonds all fall under the fidelity bonds category. Few states require fidelity bonds as a part of business licensing requirements, however some businesses, such as Janitorial services, are often asked by their clients if their firm has a fidelity bond, which would protect the clients if a theft were to occur. As a business owner, fidelity bonds are always something to consider as a method to protect both your business and customers.
Yes, at EZ Surety Bonds we only work with surety companies rated at least A- excellent, many of whom also have an appropriate T-Listing for federal bond requirements. Each of the surety companies we work with is a credible insurance company.
EZSuretyBonds.com is owned and operated by The Warnock Agency, which is licensed with the Department of Insurance in all 50 states (including the District of Columbia) and with the National Association of Insurance Commissioners (NAIC). To verify our licenses, simply visit the website for the NAIC State Bases Systems. Then, select the state, search type (licensee), entity type (business entity), and complete the search using our NPN number: 8251056.
The bonding process at EZ Surety Bonds is quick and easy. Visit EZsuretybonds.com, locate your state, and search for the bond you need. Once you’ve located your bond, simply fill out the application. When you purchase your bond, you’ll receive an electronic copy and we will mail your bond to you via standard shipping through USPS. Should you need your bond sooner, you may choose to pay an additional fee for overnight shipping.
If a new contractor who has no experience needs a contractor license and permit bond, they can visit our website at EZsuretybonds.com and apply. Commercial contractor bonds can be required at state, county, and local levels. Whether they will require a credit check will depend on the bond type and bond amount. Contract bonds, such as payment, performance, and bid bonds, typically rely heavily on the credit and industry experience of the individual applying. New contractors with questions about contract bonds should contact our agency at firstname.lastname@example.org or call us at 1-866-546-4605.
There are some instances where a court will allow a surety bond or a bail bond instead of a cash bond to get out of jail. However, many surety companies avoid writing these types of bonds because of the inherent risk of claims. At this time, EZ Surety Bonds does not work with a surety that will offer a surety bond or bail bond to get out of jail.
A surety bond number is a combination of numbers and letters assigned by the surety to an individual’s bond that acts as a unique identifier. Your bond number allows the surety, obligee, and any other parties involved to easily identify you with your bond.
Every state has different requirements for vehicle title bonds. States also refer to vehicle title bonds with several different names: defective title bond, certificate of title bond, bonded title bond, etc. Always check with your local DMV for their requirements before applying for a title bond. Fortunately, the overall process is generally the same. It helps to have the market value of your vehicle on hand before applying for your bond. Then, simply locate the state in which you need your title bond, apply, purchase your bond, then process the bond and any other documents required with your local DMV.