A bond is a three-way party agreement between the Surety, the Principal (who is the contractor or applicant) and the Obligee. The Surety is the party positioned behind the performance of the Principal. The Surety has evaluated the Principal’s ability and willingness to perform and is providing their stamp of approval with a bond. If the Principal is unable to satisfy the terms of their agreement, the Surety assumes the responsibility and reimburses the Obligee.
The Obligee is the beneficiary under a surety bond. If the Principal cannot or will not perform, the Surety steps in and makes good on the Principal’s obligation. The Obligee also has an obligation under the bond. If the Obligee fails to fulfill their responsibilities under the contract or agreement neither the Principal nor Surety has any liability.
Surety companies give paper Power of Attorney to their appointed independent insurance agents to allow the agent to act on the behalf of the Surety to bind coverage for them. AllStates Bonding has Power of Attorney with each surety company it represents. This allows our to clients get their bonds within 24 hours of the time they’re requested.
The Surety’s claim department will conduct an investigation as quickly as possible to avoid any further damages and mitigate their exposure. It is important to note that, as the Principal under a bond, a pending claim does not necessarily mean there will be a financial loss incurred since the dispute may not even be legitimate. If the Surety does determine through their examination that the claim is valid, the Principal will be reminded of their obligations under the indemnity agreement and given the opportunity to satisfy the claim first. If the Principal fails to respond, the Surety will arrange settlement with the Obligee and implement collection proceedings against the Principal.
Depending on the amount and the type of bond requested, surety underwriters may evaluate financial information, detailed credit history of the business and its principal owners, as well as management’s experience. Based on the Surety’s expert decision making ability, they will not only be able to assess a Principal’s ability to pay or perform an agreement, but the Surety will also be able to determine the Principal’s willingness to fulfill their promise. The process can be time-consuming and frustrating for the customer looking for a bond especially first time users of bonds. AllStates Bonding has streamlined this process to the point where new bond requests can be turned around in under 48 hours. You have our GUARANTEE on that!