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These surety bonds are general for all states.
Learn more about guarantee bonds, and apply today. Absolute Surety offers surety bonds nationwide through a convenient online application system.
Often referred to as financial guarantee bonds or commercial financial guarantee bonds, these are very common surety bonds that provide an unconditional guarantee of payment of a financial obligation.
Some of these bonds, such as alcohol or tobacco tax bonds, are license and permit surety bonds that guarantee both the lawful and ethical performance of the bonded party and the payment of a financial obligation. Others guarantee only the payment of a financial obligation in accordance with the terms of the bond, such as utility deposit bonds.
Financial guarantee bonds are required in a number of professions and industries. The party requiring the bond (the obligee) is most often a government agency that issues licenses or work permits to businesses that want to operate within the state or that is soliciting contractor bids on a public works project. In other cases, the obligee is a private entity, such as a utility company or a private developer seeking bids on a privately funded construction project.
The obligee establishes the requirement and the terms of the surety bond. The party required to purchase the bond is the principal, who pays a premium to obtain the bond as a guarantee that the terms of the bond will be met.
If the principal fails to carry out some aspect of the job or to make a payment as guaranteed, the obligee or other injured party has the right to file a claim against the financial guarantee bond. The surety that underwrote and issued the bond will then step in. Once the surety determines that a claim is valid, the claimant will be paid up to the full amount of the bond, and the surety will in turn collect a reimbursement from the principal.
There are two factors in determining the cost. The required bond amount is established by the obligee. The premium rate you will pay is set on a case-by-case basis by the surety. The surety’s main concern is the principal’s ability to repay any claims the surety pays out on the bond. Because of this, the principal’s credit score and financial condition are of paramount importance in deciding whether or not to issue a bond and in setting the premium rate.
Applicants with good credit typically pay in the range of 1% to 3% of the required bond amount as the annual bond premium. Applicants with poor credit can pay as much as 15%.
Our experienced surety bond professionals will gladly answer any questions you may have about any type of financial guarantee bond. Apply online today!
