What is a Surety Bond?
A bond issued by an entity (the surety company) on behalf of a second party (the contractor) guaranteeing that the second party will fulfill an obligation or series of obligations to third party (the owner/obligee). In the event that the obligations are not met, the third party will recover its losses via the bond.
Many people confuse Surety bonding with Insurance. Surety is NOT Insurance and probably more similar to Banking Credit. See below to understand better:
While many insurance companies have surety divisions (such as Travelers and Liberty), the products are much different.
- Insurance is a two (2) party contract while Surety bonds are a three part obligation between the Surety, Contractor (principle) and owner (obligee).
- Surety bonds are a non-traditional insurance product.
- Surety bonds are more similar to bank credit than Insurance whereas they guarantee an obligation and are a recoverable form of credit.
- Insurance is underwritten with various degrees of loss expectation (a risk pool) and Surety bonds are underwritten with a 0% loss ratio expectation. When underwriting, the surety takes into account recoverable assets the “principle” has that will indemnify or hold harmless the surety in the case of a claim.
Trusted Business Partners
The NYS Surety Bond Assistance Program provides financial assistance to help contractors working on NY Rising Housing Recovery Program construction projects secure surety bonding. Contractors may be eligible to receive a cash collateral of 10% to secure a surety bid bond or a payment and performance bond on New York State Housing Trust Fund Corporation Housing Recovery Program construction projects.
The Small Business Administration (SBA) guarantees bid, performance, and payment surety bonds issued by certain surety companies.
Our clients rely on CISLeads.com for exceptional project information and extraordinary customer service. Our easy-to-use website is even easier and produces even better results! Look for MORE PROJECT INFORMATION including new bid stages, detailed bid categories, enhanced searching capabilities and the ability to create even more customized reports. CONNECT BETTER AND FASTER with GCs and other project decision makers and have access to detailed contact information. ACHIEVE MORE TARGETED RESULTS because you can be specific and search for exactly what you need and drill down by project requirements and certifications. CIS gives you more of what you need to succeed; Find projects, materials and subs fast -- all in one place -- CISLeads.com. Please email [email protected] or call (800) 247-1727 x129 for a free demonstration of our website.
With over 30 years of experience building and leading diverse teams to deliver large projects, Michael now partners with leaders to develop practical solutions and exceed their goals by embracing the philosophy of “what got you here won’t get you there.”
A/E/C Business Strategies specializes in delivering Coaching, Consulting, and Training services to individual companies and public agencies and focuses on the architecture, engineering, and construction industries. Our goal is to assist agencies and prime contractors in developing strategies to meet MWBE and SDVOB contracting compliance goals and to guide emerging companies in the development of strategic marketing plans, customized business development approaches, and the completion of comprehensive business plans. We help companies work smarter, not harder by leveraging our 25 years of experience with public sector agencies.
Leading Factor has over 25 years of experience working with businesses in helping them with their IT and back-office needs. We focus on helping firms navigate the challenges of working with public and private agencies by streamlining their back-office operations and IT infrastructure for successful business growth. We implement cloud and remote access to computers, research, recommend and install hardware, software and communication tools. Train staff on using a hands-on approach as well as provide virtual assistance.
Zabell & Associates, P.C. represents companies, owners, and executives as well as current and former employees in all types of labor and employment law matters. Because of our experience in successfully litigating class action, multi-plaintiff and individual plaintiff discrimination, harassment, whistleblower, wage-and-hour / prevailing wage and related lawsuits, we have developed a reputation as aggressive and exhaustive litigators, driven to protect the rights and interests of our clients. . https://www.laborlawsny.com/
Triangle Equipment Finance specializes in financing the purchase of commercial trucks for small businesses and individual owner operators. Our programs are used by people who do not get approved by banks or a dealer's in-house finance company. For more information, go to www.trianglefinancing.com
Don handles a wide range of corporate matters and transactions, with a particular focus on the construction industry. Chair of our Construction practice group, Don has represented clients on all sides of the table including owners, developers, general contractors, subcontractors, engineers, architects, construction managers, and program managers. In the past five years alone, he has negotiated well over $100 million in construction claims and change orders. In addition, Don routinely assists clients with the Minority and Women-Owned Business (MWBE) certification process with state and local agencies and municipalities. http://cmmllp.com/donald-j-rassiger/
Coast 2 Coast Insurance Agency Inc. has been established since 2007 and is an industry leader in brokering Commercial & Personal Insurance policies. We are focused on providing high-quality service and customer satisfaction - we will do everything we can to meet your expectation. https://www.coast2coastinsagency.com
Erik Ortmann - Partner
With over 150 attorneys and counting, KDV boasts a roster of versatile lawyers that ensure each client matter receives the finest of the firm’s collective competencies and capabilities.
Eos Strategies is owned and operated by its principal, Rebecca Rodriguez. Eos Strategies is a multi-service consulting firm focused on organizational and small business growth. Our clients include governmental organizations and mid-level private firms looking to create and/or expand MWBE engagement, small businesses and start-ups who are looking to hit growth metrics, and mid-level construction firms who are looking to build stronger relationships with MWBE firms to compete on public works projects. We help our clients meet their organizational goals and to have the systems in place needed to succeed. https://www.eosstrategies.com
The “Bridge to Success” Loan Program aims to provide qualified Minority and Women-owned Business Enterprises (MWBEs) with access to short-term bridge loans necessary to execute contracting opportunities across New York State. Participating lenders are incentivized to increase lending under the “Bridge to Success” Loan Program through Empire State Development’s (ESD) Loan Loss Reserve Fund. This fund of $2.73 million will mitigate the risks that “Bridge to Success” Lenders may take on. https://esd.ny.gov/bridge-success-loan-program
A licensed and authorized representative of an insurance or surety company. Only a licensed agent can legally solicit or sell insurance policies or surety bonds.
A person who has the Power of Attorney, granted to him or her by a surety company. This allows them to enforce or execute a surety bond on behalf of that company.
A bond required by contractors in order for them to be able to bid on a contract. The bid bond guarantees that a contractor will execute a contract at the bid price they have offered. See Contract Bond.
A legal agreement between three parties: the surety, the bond obligee, and the bond principal. Under the bond agreement, the surety agrees to answer in front of the obligee for the default of the principal.
The duration of the bond. A term may be a fixed amount of time, typically annual or biennial, or a continuous term which means it is automatically extended until cancelled or terminated by one of the parties to the bond.
The amount and size of projects a surety is willing to bond over the course of a year for a contractor. This may either be a single bond size limit or an aggregate limit.
A requirement by the surety for subcontractors on a project to be “bonded back” to the general contractor.
Also known as the penal sum of the bond. This is the total bond amount, i.e. the total amount of compensation that may be extended under a particular bond.
Someone acting as an intermediary between a client (such as a contractor) and a surety in negotiating or obtaining a bond on behalf of the former.
A clause in the bond agreement allowing a surety to cancel any future liability under the bond. The surety must inform the obligee of its cancellation through written notice.
A non-judicial dispute resolution proceeding made against a bond by a claimant.
A party defined within a surety bond agreement or a statute as being entitled to make a claim against a bond to be compensated for losses or damages it has suffered.
One of several sureties participating on a bond with an obligation joint and several. A limit of liability for each surety may still apply under a co-suretyship.
Assets or anything else of value pledged with the surety to protect it from loss due to a principal defaulting on their bond agreement. Collateral can be used as a principal’s indemnity in case of default.
A general term for any type of surety bond required by a contractor working on a contract. Contract bonds, also known as construction bonds, guarantee that a contractor will comply with the conditions of the contract. See Bid Bond, Payment Bond and Performance Bond.
The sum of money paid by the client, or owner, to the contractor. The contract price is the basis for the bond cost or premium that contractors need to pay to get bonded.
A pre-licensing requirement for contractors in most states. The bond guarantees that contractors will comply with state rules and regulations for contractors and conduct business honestly and professionally.
A general term for any type of bond required by a court. Court bonds may be required by probate courts, to guarantee for the trustworthiness of a fiduciary, and appeal courts when a litigant wants to appeal a court judgment. See Fiduciary Bond.
The violation of the terms of a surety bond or a contract due to failure to perform the duties set forth therein.
The date on which the coverage provided by a bond becomes effective.
A bond required by the Employee Retirement Income Security Act to protect employees with benefit plans covered by the Act. The bond protects employees’ benefit plans from theft or fraud.
When the obligation of a surety toward a project or obligee ends. Usually a surety is not exonerated upon completion of a project - under most contracts there is a warranty period after completion during which the surety is still liable.
A general term for any type of bond that is intended to protect employers and companies from employee dishonesty, theft, fraud or else.
A fiduciary or probate bond is typically requested by a probate court. This bond is issued to a court-appointed fiduciary, guardian, administrator, trustee as a guarantee for their trustworthiness.
The guarantee, under a bond agreement, that a principal will reimburse the surety for any compensation it extends to a claimant under that bond.
The agreement to restore a party to its previous financial position, and protect it against loss. An indemnity agreement is signed by bond principals to guarantee that they will repay the surety if it extends compensation to oblige(s) under the bond agreement.
The license and permit bond is a pre-licensing requirement for individuals and companies who need to obtain a business license in order to operate their business. This bond guarantees that the business will operate in accordance with all laws and regulations pertaining to its industry. It is also known as a commercial bond.
The 1935 Miller Act requires contractors working on federal government projects to obtain a performance bond that guarantees their performance on the contract. The Act further requires contractors to obtain a payment bond to guarantee that they will pay their subcontractors and material suppliers. Most states have so-called Little Miller Acts that pose a similar requirement on state projects.
The party protected by loss or damages under a bond agreement; a bond ‘runs to’ the obligee. The obligee can be an individual, company, government or government agency.
A type of contract bond that serves as a guarantee that a contractor will pay the subcontractors, suppliers and laborers they work with on a contract. Typically issued alongside a performance bond. See Contract Bond.
A type of contract bond that serves as a guarantee that a contractor will perform work according to the conditions set forth in the project contract. The performance bond protects the project owner from contractors who default or violate the conditions of the contract. Typically issued alongside a payment bond. See Contract Bond.
The cost of the bond paid by the principal to the surety in exchange for the financial guarantee provided by the bond. The bond premium is typically a percentage of the total bond amount.
If a contract amount is changed, the surety will adjust the premium to decrease or increase, depending on the change in the contract amount.
The party that is bonded to the obligee under the surety bond agreement. The bond is put in place to guarantee the principal’s honesty, integrity and compliance with legal requirements.
Protection that the surety company secures for itself through a reinsurance company. A reinsurance guarantees that if a surety suffers a major loss, a large part of that loss will be carried by the reinsurance company. Reinsurance is a form of ceding part of the liability to another company.
A type of financial guarantee bond. The sales tax bond guarantees that businesses will pay any outstanding taxes or dues to the government as well as file business tax information within the legal deadlines.
The company which issues the bond and guarantees for the performance of the principal to the obligee.
A three-party agreement between a principal, an obligee and a surety. Backed by the surety, the bond guarantees to the obligee that the principal will keep their contractual obligations.
The continuation or renewed issuing of a bond for a new premium term. When renewing a bond, principals will need to pay a bond renewal premium.
A surety must meet the qualifying limits imposed by the U.S. Department of the Treasury to be eligible to issue bonds on federal contracts. These limits are determined by the U.S. DoT on the basis of the “qualifying power”, or financial capability, of the surety.
The U.S. Department of the Treasury list of sureties eligible to issue bonds on federal contracts.
The process of qualifying for a bond. During underwriting, the surety investigates the character, capacity and capital of the bond applicant to assess the risk involved in issuing a bond to them.