Surety Bonds are important tools used in many industry sectors to mitigate risk and ensure that contractual obligations are fulfilled. While many professionals understand the value and necessity of this form of financial protection, few understand what a surety bond truly is and how the process works.
One of the most important things to understand about surety bonds is that they are not a form of insurance. Instead, these bonds are essentially a form of credit which involves three parties: the principal, the obligee, and the surety who ensures that the principal’s obligations will be performed. The principle is the entity acquiring the bond; typically these are businesses preforming a contractual obligation or mandate. An obligee is the party to which an obligation is owed. For example in the construction industry the obligee is often the project owner or manager, it can also be the general contractor when subcontractors are brought in no a project. The surety company is the third party offing financial assurance to the obligee in the name of the principle party.
Surety Bonds act like financial promises between the three parties. The principle seeks a bond from a surety provider to prove to the obligee that they have the necessary credentials and capacity to perform the functions being solicited by the obligee. Essentially, a surety bond ensures contract completion in the event that a contracting business cannot fulfill their obligations. Should this occur, the surety provider will either financially compensate the obligee for any incurred losses or find suitable means for contract completion, such as another contractor willing to complete the project. In turn, the surety would then seek compensation from the principle for any financial losses it sustained.
There are many different types of Surety Bonds available to Middlesex County businesses, including financial guarantee bonds, license & permit bonds, and various miscellaneous state and municipal bonds. At Sinclair Risk and Financial Management we offer a complete array of surety services to businesses through Connecticut. As part of our holistic risk management approach, we specialize in providing complete business insurance and strategic solutions. Our Middlesex County Surety Bonds specialists can help you secure the financial qualifications you need to stay competitive. Give us a call today at (877) 602-2305 to learn more about all of our unique business solutions today.