09 Aug, 2017
Whether you expect a bond from a client, or have to carry a bond, you are integral to the function and execution of a bond. Understanding your role in a surety bond can help you follow your obligations to a contract.
The surety bonding process usually involves three different parties–the principal, the obligee and the surety company. Each of these parties plays an important role in the bonding process.
Understanding Surety Bonds
To understand roles in surety bonds, you first have to understand bonds themselves. Surety bonds are compensation and credit agreements between two parties in a contract.
When engaging in contracted work, a contractor has to complete the job according to the contract. Failure by a contractor to honor the contract might cause undue financial harm to the client. Therefore, the client will likely expect compensation for any lost costs. The surety bond can provide that compensation.
During the surety claims process, the contractor, the client and the surety company are all involved.
Understanding the Three Surety Bond Parties
Surety bonds function differently than traditional insurance. Surety bonds only guarantee that the bond carrier will compensate the client. Therefore, each party in the surety agreement plays a role in ensuring payment of the bond.
At times it is hard to understand who receives payment from a surety bond claim. However, bond parties need to remember that the principal must pay the obligee. With the right bond, adequate transactions can take place.
Do you need a surety bond? We can help. Call La Familia Auto Insurance at 888-751-7511 for more information about a Dallas surety bond.