government) that the principal (business owner) will fulfill their obligations. The bond form is typically signed by the principal(s) and made official by inclusion of the surety company's official seal and signature of the attorney-in-fact. A surety bond is a contract, a guarantee. The final amount of the premium is determined by several factors, including: For more information on what you can expect to pay for a surety bond, see Surety Bond Costs Explained, or use our free Surety Bond Cost Calculator to calculate your premium. This can include either a financial payout or taking other actions to make sure the work is completed per the terms of the contract. A power of attorney will also accompany the official bond form. These bonds are part of business risk management. Professionals needing bonding or insurance should contact NFP Surety, one of the leading financial organizations in the country, and one of the premier providers of both bonds vs insurance policies. Working exclusively with A-rated and T-listed bonding companies gives us the confidence to offer a 100% money-back guarantee. Our family has been writing Surety Bonds since 1971. This information will include the bond type, bond amount, and any other specific requirements the obligee may impose. Examples of a license violation could include fraud, misrepresentation, or late payment. Commercial license and permit bonds have a statutory amount (coverage) that usually ranges from $5,000 to $100,000. Where to Get Surety Bonds. Follow on Facebook Follow on Twitter Find us on LinkedIn, Certificate of Title Bond (for vehicle titles), Click to Call and Speak with a Surety Bond Expert, thousands of different types of surety bonds across the country, Public insurance adjuster license surety bonds, Credit repair service/provider license surety bonds, Private investigator license surety bonds, Mortgage broker or loan originator license surety bonds, one of these parties is damaged financially by the principal's violation of bonding terms and conditions. There are two other techniques that are commonly used to strengthen a surety bond application and help secure an approval or get a lower premium. They also provide protection to people who hire contractors for a job. A business demonstrates its commitment to financial responsibility and commitment to ethical business practices with a surety bond. The Heard Act (later replaced by the Miller Act) was passed in the United States in 1894 requiring that surety bonds be posted to guarantee performance of contractual duties for all construction projects involving federal funding. Surety Bonds vs. Insurance The main difference between surety bonds and insurance is who the policy protects. The Office of General Counsel issued the following opinion on June 18, 2002, representing the position of the New York State Insurance Department. If the principal fails to meet their agreed upon obligations with the obligee, the surety may be required to resolve the dispute by paying a claim to the obligee. The three parties in a surety agreement are: In practice, surety bonds can have several variations to their definition, meaning, and purpose depending on the specific bond requirement. There are thousands of different types of Surety Bonds, and our company can transact most of them. Most businesses are also required to have some sort of separate business general liability coverage that protects their business from routine perils and losses. And don’t forget that credit problems don’t have to prevent your business from getting a surety bond—see How to Get a Surety Bond with Bad Credit for more information. Another common type of surety bond called is referred to as a contract bond. The term surety bond insurance is actually a misnomer, as it is not an insurance contract. Consider surety bonds a cost of doing business with the U.S. government. An applicant will typically need to be prepared to provide basic information about the bond required, the business, personal information such as name, address, and social security. These surety bonds provide a guarantee that contractors complete construction projects in accordance with specifications and make all required payments to subcontractors and suppliers. This requiring party is referred to as the "obligee" and each obligee has a unique bond form outlining the terms of the bond contract and often times referencing state laws and statutes detailing the terms of the bond.