Are you wondering how surety bond companies like Viking Bond Service keep current in a marketplace that changes as quickly? To know how Viking Bond Service defines surety bonds in 2018, it helps to understand what a surety bond is, what the most common types of surety bonds are, and how the definition has changed in recent times.
A surety bond is a sort of protection, often for the general public, and sometimes for specific parties to the bond. It is usually required by local, state, or federal government agencies for particular jobs or contracts. Although surety bonds are often lumped together with insurance and are sometimes even guaranteed by insurance companies, they are distinct three-party agreements.
The principal is the primary business or person who will be licensed, perform a contractual obligation, or otherwise fulfill duties in line with what the obligee expects. The obligee, often a government agency, is the recipient of the promise or obligation to perform. The third party is the surety, who provides the financial guarantee, backing up the promise of the principal.
If the principal fails to make good on their obligation, the obligee can make a claim on the bond. If that claim is valid, the surety will pay it according to the terms of the bond. The principal is ultimately responsible for repaying any amount the surety pays out on a claim.
There are four main kinds of surety bonds. Contract surety bonds and commercial surety bonds are the most common and are the most likely to be required. A contract surety bond ensures that contractors and people they employ fulfill the obligations of construction contracts. A commercial surety bond promises that licensed businesses will operate in compliance with all required codes. Usually, commercial bonds are mandatory for professionals who the law requires to operate with a specific license.
Fidelity surety bonds guard customers and businesses against theft and are less common. Companies whose employees handle many assets or lots of cash are typically strong candidates for fidelity surety bonds.
Court surety bonds protect against litigation costs and, like fidelity bonds, are less common. Plaintiffs with fiduciary duties or in court cases with the potential to become very costly might be required to carry court surety bonds.
Surety bonds were around before even the modern calendar, and for thousands of years, they didn’t change too much. Modern surety bonds were born in the 19th century, after William L. Haskins proposed The New York Guarantee Company in 1837. This became the first surety company in the US.
However, since 2000, numerous changes in the market have changed the way businesses and individuals work with surety bonds. Surety bonds have exploded into new markets and industries and are even more important than they used to be. Here are some examples of ways the industry has changed in recent years:
There will always be new kinds of surety bonds and trends in the marketplace. In the near future, we may see surety bonds covering the conduct and performance of robot workers and autonomous vehicles, or energy efficiency/climate resilience surety bonds for construction projects.
The only way to be sure you’re getting the very best advice on surety bonds is to work with a company that makes it their business to stay abreast of all of these developments—a company like Viking Bond Service. Contact us for all of your surety bond questions and needs, and benefit from decades of experience and expert advice.
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