What Is A Surety Bond?

Bergen County Business Insurance | Surety Bonds

Bergen County Business Insurance | Surety Bonds


What is a surety bond? It is a good question and one often asked by those who are required to purchase one for their business. This type of bond is a type of insurance in that offers a guarantee of coverage when compliance is not met. When a job requires a surety bond a company will purchase one through a Bergen County business insurance company.

How does a surety bond work? There are three parties involved in a surety bond, the principal, the surety, and the obligee. The principal is the person, or business, that buys the bond and is performing the services for which the bond covers. The surety is the insurance company guaranteeing the obligation of the principal. The person, or business requiring the bond is referred to as the obligee. In most cases the obligee is a governmental entity, whether it be local, state, or federal.

An example of a surety bond would be in the case of road work. The businesses bidding on the road work know they will be required to present a surety bond to proceed with the work. The winning bidder will get the bond, assuring the governmental entity charged with the road that the work will be completed and if it is not the work will be guaranteed.

A surety bond is required only when requested. While this type of insurance is typically only required when public entities are involved there are times when they come into play. These bonds are typically associated with large construction projects. Most insurance agents in Lyndhurst NJ can help explain the need for a surety bond as well as how to obtain one.

fails to comply with bonding terms and requirements, the surety company is financially obligated to cover damages up to the bond limit (or penalty) of the bond. The surety bond principal is also required to reimburse (or indemnify) the surety for losses paid to damaged parties.

The party requiring the bond is called the obligee. Each obligee has a specific bond form that is prepared and pre-populated for your convenience by Surety Bonds Direct. The specific bond limit, term, and other key information related to the customer and obligation can be found on the bond form.

Contact our team at Bogle Agency Insurance today to learn more about Bergen County business insurance and surety bonds in Bergen County NJ. We welcome the opportunity to answer all of your insurance questions. Let our knowledge and experience help you understand what type of insurance you need. We welcome the opportunity to answer your question, whether it be what is a surety bond? or something else entirely.