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Things You Must Look At When Applying For Surety Bond

Surety bonds provide a guaranteed performance on the contract. It builds a temporary relationship between the obligee, principal and the surety. The surety company provides a financial guarantee to the obligee that the principal will fulfill its entire obligation as per the contract. In simple words, surety bonds can be considered as a risk transfer mechanism.

While applying for surety bond, there are certain important things that you must consider:

  • Before being issued a surety bond, contractors are required to undergo an in-depth pre-qualification process.
  • Obtaining bonds and delivering them to the owner is the responsibility of the contractor, who will consult with a surety bond provider.
  • The cost of surety bond may vary depending on the type of bond and the amount of bond coverage.
  • Surety bond premiums generally range from 1-15% of the total bond amount.
  • The cost of a performance bond is a onetime premium that generally ranges from less than 1% to 2.5% of the contract amount.
  • One must get a surety bond only from an approved surety agency that is licensed in your state.

It is important to gather all the important information about a bond in your state in order to avail the right bond.


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