Surety Bond Coverage
Central Insurance writes all surety bonds for all customer profiles. With access to the industry’s lowest rates on the most common bond types, we can reliably write over 99% of our submissions at the best rates possible.
Whether you need a bond to start a business, manage an estate or begin work on a contract, working with Central Insurance guarantees you will get the most value for your insurance dollar.
What is a Surety Bond?
A surety bond is a contract between three parties – the principal (person purchasing the bond), the surety company, and the obligee (the entity requiring the bond, typically a state or local government). Surety bonds guarantee that the Principal will act in accordance with the terms established by the bond, which are usually a set of statutes or ordinances required for business licensing or performance of contract terms.
Unlike most insurance products, the principal is required to indemnify the surety company against all losses. In other words, the surety company will pay the obligee up to the bond amount for valid claims; however, the principal must reimburse the surety company for all losses, typically including attorney fees and other claims handling expenses.
What is the Purpose of a Surety Bond?
Surety bonds protect the obligee from financial harm in the event that the principal violates the bond provisions. So yes, surety bonds are insurance, but for the obligee rather than the principal. For example, if an auto dealer sold a consumer a vehicle after altering its odometer, then the consumer could file a claim against the dealer’s bond to recover any losses. Since the dealer violated the bond’s provisions, which in this case prohibits any acts of fraud, the consumer can receive compensation through the dealer’s bond.
Think of surety bonds as an extension of credit lent to the principal by the surety company. The surety company guarantees the obligee will be compensated if the principle violates the bond’s provisions, and the principal pledges to repay back to the surety company all claims and claims handling expenses. Without surety bonds, principals would be required to put up the full bond in cash as collateral, which could severely limit their working capital. Surety bonds satisfy the obligee’s liability requirements without forcing the principal to set aside large sums of cash.
What are the Different Types of Surety Bonds?
There are many different types of surety bonds, over 11,000 to be exact. However, most bonds will fall into one of the following categories:
- License and Permit
- Financial Guarantee
- Miscellaneous
- Public Official
- Contract
- Court
- Fidelity
For more information about these or any of our other quality, affordable coverages, or for an insurance quote, please contact your independent Central insurance agent.
Need a Central agent? Link to our convenient Agency Locator to find an agent in your area.
The policy coverages described above are in the most general terms and are subject to the actual policy exclusions and conditions. For specific coverage details and policy exclusions, refer to the policy itself or contact a Central agent.
