What Are Surety Bonds?
Surety Bond is the generic name for all bonds and they are usually required by the State or Federal Government.
The bond is an agreement or contract between three (3) parties: the Principal, Obligee and the Surety Company. The Principal is the primary party that will perform the contractual obligations of the bond while the Obligee is the party who requires the bond or is the recipient of the obligation set forth in the bond. The Surety Company is the one who is insuring the principal of the obligations referenced in the Bond Form.
Types of Surety Bonds
There are various types of Surety Bonds required depending on the business operations. Some of them would be, but is not limited to: Performance Bonds, Construction Bonds, DMEPOS Bonds, and Residents' or Patients' Trust Fund Bonds.
Performance Bond
The bond guarantees the principal will act in accordance with certain laws. If the principal fails to perform in this manner, the bond will cover resulting damages or losses.
Construction Bond
This falls into the category of a Performance Bond and would guarantee that the contractor holding the bond will perform a specified obligation or face financial penalties.
Durable Medical Equipment, Prosthetic, Orthotics and Supplies Bond (DMEPOS)
DMEPOS Bonds are required by the Federal Government in which any supplier of medical equipment etc needs to obtain a $50,000 Medicaid Supply Surety Bond.
Residents’ Trust Fund Bond
This bond also known as Patients’ Fund Bond is required in most states for nursing homes and rehabilitation facilities that hold their residents' money for safekeeping. The bond amount must at least cover the amount of money that the home has accrued from its patients. In this case surety companies will require a Commercial Crime Policy to be in place with limits that concur with the bond amount.
The cost of the bond will vary depending on the type of surety bond and the bond limit. It will also often be based on the financial strength of the principal.
Although they often go unnoticed, surety bonds play a major role in countless industries across the United States. Call our office today, or do an online-bond application for the best surety rates!
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