A surety bond is a type of contract that is made to make sure that the person purchasing the bond fulfills whatever is required of him in the contract. If the person purchasing the bond does not perform as expected, the person protected by the bond receives a financial reimbursement from the company issuing the bond. So basically, there are three parties involved in this type of contract and they are the company or person issuing the bond (surety), the person who is being protected by the bond (obligee) and the person who purchases the bond (principal).
A surety bond brings many different benefits for a principal, like an increase in client trust. A bonded professional is someone that many clients are more willing to transact with. There are even clients who will not transact at all unless the person is a bonded professional. A principal can use a surety bond as a marketing tool to benefit himself and his company. He can purchase a bond and market himself as a bonded professional that people can trust.
Another benefit that a principal enjoys is the fact that he does not need to put up actual money to guarantee the client of his products or services. The surety bond acts is the adequate guarantee to protect the other party. What's more, the principal only pays a small percentage of the amount being guaranteed when he buys a surety bond. The percentage he needs to pay depends on the company that issues the bond.
It is important to keep in mind that a surety bond is not at all a type of insurance. Therefore, as a principal, do not think that a surety bond is a means to escape from responsibility. The contract simply guarantees the obligee that the principal will pay the expected amount, and if you are unable to do so, there will be another form of recourse.
Obligees benefit most from these bonds because it is their sure form of protection. It is a common thing among business deals that one party fails to fulfill its responsibility and the other consequently suffers the damages. Having a surety bond makes sure that if the principal fails to meet the expected service or provide the anticipated products, the obligee has the right to pursue a claim against him.
A surety bond brings many different benefits for a principal, like an increase in client trust. A bonded professional is someone that many clients are more willing to transact with. There are even clients who will not transact at all unless the person is a bonded professional. A principal can use a surety bond as a marketing tool to benefit himself and his company. He can purchase a bond and market himself as a bonded professional that people can trust.
Another benefit that a principal enjoys is the fact that he does not need to put up actual money to guarantee the client of his products or services. The surety bond acts is the adequate guarantee to protect the other party. What's more, the principal only pays a small percentage of the amount being guaranteed when he buys a surety bond. The percentage he needs to pay depends on the company that issues the bond.
It is important to keep in mind that a surety bond is not at all a type of insurance. Therefore, as a principal, do not think that a surety bond is a means to escape from responsibility. The contract simply guarantees the obligee that the principal will pay the expected amount, and if you are unable to do so, there will be another form of recourse.
Obligees benefit most from these bonds because it is their sure form of protection. It is a common thing among business deals that one party fails to fulfill its responsibility and the other consequently suffers the damages. Having a surety bond makes sure that if the principal fails to meet the expected service or provide the anticipated products, the obligee has the right to pursue a claim against him.
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