A surety bond is an insurance policy that guarantees a particular contract or business deal will be honored. The United States alone recognizes more than 50,000 different kinds of surety bonds. Each one is backed by the same basic principles. If you’re unfamiliar with these bonds, find out more information in the following guide.

A Guide to Surety Bonds

What Is It?

A surety bond is a legally binding arrangement that includes three parties. The principal is the individual or business that purchases the bond to guarantee their work, while the obligee is the client or entity that requires the protection to prevent financial loss. The third party is known as the surety. They’re responsible for guaranteeing that the principal honors their commitment to the obligee.

If the principal violates the agreement, the surety will step in and compensate the obligee according to the terms of the bond. This way, both the principal and obligee have a layer of financial protection from the bond.

How Do You Obtain One?

Surety bonds are especially common in the construction industry because so much is at stake for clients that hire contractors. However, they also have a place in many other industries. Auto dealers and mortgage brokers are often required to purchase surety bonds as a prerequisite to obtaining their professional licenses. The specific bond requirements vary by state and industry. 

Once you know what kind of bond you need, turn to a local insurance company that offers surety services. A seasoned agent can explain the terms of the various arrangements you’re considering to help you obtain the best one for your particular needs.

If you need to obtain a surety bond to protect your company, turn to Associated Insurance Services. This Anchorage, AK-based agency is proud to act as a surety for businesses across a broad range of industries. They also help clients find reliable insurance policies that meet their needs. Their agency has been serving the community since 1991, and they can assist with homeowners, auto, health, and commercial insurance. To request a quote, reach out on their website, or call (907) 349-2229.