When you are looking into getting a surety bond, one of the first things you need to determine is who the principal is. The principal in a surety bond is the person or company who is responsible for performing the contract that is outlined in the bond. They are also responsible for any damages that may be caused if they do not fulfill their obligations. In this blog post, we will discuss what a surety bond is and who the principal is about it!
What is a surety bond?
A surety bond is a three-party agreement between the surety (person or company guaranteeing payment of an obligation), the principal (person or company who has entered into a contract and must fulfill it as per agreed terms), and the obligee (the entity that requires the principal to enter into such a contract).
Types of surety bonds?
Common types of surety bonds include contract, court, license & permit, probate, and fidelity bonds.
Contract bonds are a type of surety bond that guarantees the satisfactory completion of a project by the contractor. License & permit bonds guarantee adherence to the applicable laws and regulations set out by the obligee. Court, probate, and fidelity bonds are more specific and are used in court proceedings such as guardianship or fiduciary arrangements. Regardless of the type of surety bond, all are designed to provide financial security for the obligee in case of non-compliance by the principal.
How do surety bonds benefit the principal?
Surety bonds benefit the principal in a variety of ways. They assure that obligations will be met, protect from potential financial losses due to non-performance, and may even help to ensure ethical behavior.
What is a principal in a surety bond?
A principal in a surety bond is the person or entity that has requested and entered into an agreement with a surety company to guarantee the performance of an obligation. The principal has agreed to pay any losses caused by their failure to fulfill that promise. When it comes to surety bonds, the parties involved are typically the obligee (the party that requires the bond) and the principal (the party who is providing the surety bond to back up their promise of performance).
How much does a surety bond cost?
The cost of a surety bond depends on the type and amount of the bond, your credit score and history, and other factors such as business experience. Generally speaking, small businesses can expect to pay anywhere from 1-15% of the total value of the bond.
Do principals need good credit?
The answer is yes, good credit can be beneficial for principals. Good credit means that a principal has a history of responsibly managing debt and paying bills on time. Principals need to maintain good credit because it can help in securing loans, mortgages, and other financial instruments that may be needed to support their school or district.
What are the requirements for the principal to obtain a surety bond?
To obtain a surety bond, the principal must submit a detailed application that includes financial information, prior experience in similar projects, relevant licensing and bonding history, and other information. The applicant must also demonstrate their creditworthiness by providing bank statements, tax returns, and other documents. The insurer will then review the proposed risk and determine if they are willing to issue the bond. If approved, the principal will be required to pay a premium for coverage to be granted.
A surety bond claim against the principal?
A surety bond claim against the principal is a claim made by the surety to demand that the principal pay for any financial losses caused by their failure to meet contractual obligations. For a surety bond claim against the principal to be successful, the claimant must prove that the principal was negligent in fulfilling their obligation and failed to act in good faith. Additionally, proof of actual damages or financial losses resulting from the breach must be provided. The surety may also use other forms of evidence, such as a sworn statement or contract copies, to back up their claim.
Where can a principal obtain a surety bond?
Principals can obtain surety bonds from several sources, including insurance agents and brokers, banks, credit unions, and other financial institutions. It is important to work with a professional who understands the surety bond process and can provide assistance in obtaining the most competitive rates and terms for your specific needs. Additionally, many sureties have websites where you can obtain quotes and even purchase bonds online. However, it is always beneficial to speak with an expert to ensure that you are getting the best coverage for your unique situation.