Contractors Insurance Bonds California
Most construction contractors are familiar with the process of obtaining surety bonds, but they may not be aware of the legal relationships bonds establish the relationships among the principal (the contractor), the obligee (usually the owner) and the surety. A surety bond is not an insurance policy. A surety bond is a guarantee, in which the surety guarantees that the contractor, called the “principal” in the bond, will perform the “obligation” stated in the bond. Bonds frequently state, as a “condition,” that if the principal fully performs the stated obligation, then the bond is void; otherwise the bond remains in full force and effect. Because bonds are actually loans, the amount of the bond is the principle, and interest is paid on the principle: usually at a fixed rate. By paying an insurance premium, the bond issuer gains the security of knowing that the principle and interest of the bond will be paid for if the issuer in unable to do so.
How bonds are classified depends on several factors, including :
- Performance – to guarantee the performance of contractually agreed upon work
- Bid – guarantees the beginning of work following the winning of a bid
- Indemnity – guarantees any losses should a party fail to meet deadlines
- Payment – promises payment to all sub-contractors and vendors
- License – a bond guaranteed to a state or federal agency
- Whether or not they are secured or unsecured
- Maturity rating
- Financial reliability of the issue
When a bond issuer wants to assure potential investors that a bond is really and truly safe, they often turn to a bond insurer, like Dean L Ricken Insurance Agency . We can make both you and your potential investors feel comfortable and secure with their bond purchase. Simply fill out our quick and easy online form or call us at 559-299-8888 today for a free secure bond insurance quote.
