There are hundreds of surety bonding solutions that can be purchased in the state of Arkansas. While some of these bonds, such as the license and permit bond, specifically serve to protect the public from unscrupulous contractors and professionals, all of them have a similar purpose in that they provide some measure of confidence in professional workmanship delivered by a business contractor or service provider.
What Is a Surety Bond?
A surety bond is a contract agreement between three parties, consisting of a principal who purchases the bond, an obligee who requires the principal to purchase this bond, and a surety company that sells and issues the bond to the principal. The bond itself has a face value amount, which is the maximum dollar amount of any claim that an obligee could make against the bond. The obligee would make such a claim if the terms specified for good performance and compliance with laws and regulations were to be violated or neglected by the principal in the execution of whatever work they were hired for.
How Do Bonds Work?
Sureties work in a manner similar to insurance, in that they provide protection for one of the parties to the contract agreement: the obligee. Since an obligee is hiring a principal to perform a task or job, some kind of assurance is needed that the job will be done in a forthright manner that fulfills the stipulated performance terms. If the principal does not meet those expectations, they are in default of the bond's terms, and an obligee would then have the right to claim the bond, up to but not exceeding its face value.
In that event, the surety company would be obliged to pay that dollar amount to the obligee, covering any damages or unfulfilled terms. Subsequently, the surety company would then seek reimbursement for the full amount from the principal who caused the default. This, of course, provides strong motivation for the principal to live up to the stated terms of the agreement, to avoid having to pay the bond amount, as well as the damage to their professional reputation.
Types of Arkansas Surety Bonds
There are two main categories of sureties, those being commercial bonds and construction or contract bonds. There are far fewer sub-types within the construction bond category, some of which are site improvement sureties, supplier payment bonds, bid bonds and performance bonds. It would be fairly accurate to say that all types of sureties that are not included in the construction bond category fall under the general umbrella of the commercial surety category.
In Arkansas, as well as the other states of the US, there are hundreds of types of commercial bonds. Some of the most common commercial bonds are license and permit bonds, public official bonds, fiduciary bonds, fidelity bonds and court bonds. While all of these serve specific purposes, they all have the same general intent, which is to ensure some level of protection for one of the parties and to impose a penalty on the defaulting party, which compensates the aggrieved party.
Industries that Require Surety Bonds in Arkansas
Virtually every industry in the country makes use of bonds because they can provide powerful motivation for contractors and other workers to live up to agreed-upon performance terms and conditions. They also serve as an effective mechanism for protecting some segment of consumers that might use the services or products delivered by those contractors. Although they come into play in such a wide range of industries, probably the two single biggest users of sureties are the construction industry and the various levels of government organizations.
With the many contractors and subcontractors working on a typical major construction project, it's easy to see why bonding would be necessary to encourage and enforce compliance with the terms of a work agreement. In the case of government agencies, from the federal government down to local levels, there is a keen interest in protecting taxpayers who support each of these levels of government. Since even government agencies are obliged to account for how funds are spent, they generally require contractors to be bonded so that there are some means of redress in terms of monetary recovery, should a contractor default on the terms of a bond.
How to Get a Surety Bond in Arkansas
Getting bonded in Arkansas is a fairly simple procedure, once you know exactly which type of bond you need to apply for. If you aren't sure about this as a contractor, the hiring company or individual (obligee), will generally be able to tell you exactly what you need. Most bonds can be applied for online, and before you apply, you'll need to know what dollar amount the obligee requires for the bond, which will be determined by the potential for financial damage towards an obligee.
You should also know the terms required by an obligee because these will be written into the language of the bond as constraints, which you will be required to live up to. After you've applied for the surety, our team will prepare an indemnity agreement that contains all the information described above. This indemnity agreement must be signed and notarized by a public official, then returned to us. Upon receipt of the indemnity agreement, the actual bond can be written up and delivered to you, at which time you are then covered by its terms. Call us to get your free Arkansas surety bond quote today!
Our team provides affordable Arkansas surety and fidelity bond insurance. Every Arkansas surety bond is prepared on a specific AR bond form, as prescribed by the entity requiring the bonding (known as Obligee). Below is a list of surety types that are commonly requested in Arkansas.
Apply for your Arkansas surety bond now by completing our online application. Quotes are always free.
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