Georgia surety bonds are legally binding agreements between three parties, consisting of a principal who needs the bond, an obligee who requires the principal to have the bond, and a surety company which sells the bond to the principal. Georgia surety bonds serve the purpose of providing a guarantee to the obligee that the principal will complete some kind of action, and will adhere to specific laws or regulations in the performance of a specified task. It acts as protection for the obligee that a job will be done correctly, and in the manner prescribed by that party. Quite often, government organizations are the obligees which require contractors to purchase bonds as a guarantee of following laws and fulfilling other performance terms of the agreement.
How Do Surety Bonds in Work in Georgia?
Since a principal is required to get bonded to get the government job in question, they will generally search for a surety company willing to sell such a bond, and provide the financial backing for the face value of the bond. In the event that the principal fails to live up to the terms specified in the bond, the obligee would have the right to make a claim against that face value amount, either for all of it or some portion. That money would be paid by the surety company at the time, and afterward, the surety would seek to be reimbursed by the principal. The penalty for not fulfilling the agreement is therefore very severe for the principal, both in financial terms, as well as in the loss of reputation.
Types of Surety Bonds in Georgia
As you might expect there are a number of different kinds of sureties, including contract bonds, commercial bonds, license and permit bonds, and fidelity bonds, each of which serves a slightly different purpose, but in general requires certain actions to be fulfilled and regulations to be adhered to. Here are the four main types of bonds, and within each of these categories there might literally be hundreds of specific bond types:
- License or permit - required by state governments in order for a business to operate within its jurisdiction
- Commercial bonds - utility bonds, lottery bonds, private business bonds
- Court bonds - there are several kinds of court bonds, including fiduciary, judicial, plaintiff's attachment, and executor
- Construction bonds - in this area, there are bid bonds, supply bonds, payment bonds, and performance bonds
Industries that Require Surety Bonds in Georgia
One of the largest industries requiring sureties is that of the construction industry, because performance is so critical to job completion, and adherence to local regulations is also a necessity. It is estimated that as much as 66% of all premium written into surety is for the construction industry, which is understandable because bond amounts can run fairly high in large construction projects. If a contractor fails to live up to the terms of the contract bond, then they are subject to have a claim filed against them by the obligee in the transaction, which is the owner or manager of the project.
Commercial bonds are very common in the contractor business in general, as a means of ensuring adequate performance in all the many types of contracting businesses, e.g. plumbing, electrical, painting, etc. Contractors who are bonded provide extra assurance to consumers that they will do quality work and use quality materials in the performance of their profession. These types of bonds are often required by the state where a contractor works, as a means of protecting consumers against shoddy workmanship or fly-by-night operators.
The legal system makes widespread use of bonds in its proceedings, in the form of guardianship bonds, probate bonds, executor bonds, and others. For instance, in a guardianship bond, a prospective guardian might be required by the court to post a bond amount against their guardianship of an underage individual. The bond acts as a kind of guarantee that the guardian will fulfill the duties required by the court legally and in a forthright manner, to the satisfaction of the court. An executor bond might be required as a guarantee that the executor of someone's estate will manage that estate according to the intentions of the deceased individual.
How to Get a Surety Bond Georgia
The first step in getting a surety bond Georgia is finding out exactly which type of bond you need, and that will generally be established by the obligee. Since the obligee is the party requiring the bond in the first place, that is the party that determines the kind of bond the principal must obtain. In many cases, this will be a government agency, and that agency will specify the type of bond required of a contractor before they can be hired to do work. The same agency will also specify a face value amount for the bond, which is the maximum amount of any claim that could be made against the principal (which amount is guaranteed by the surety company).
Next, it will be necessary to find a surety company willing to underwrite the bond and sell it to a principal. If the principal has had claims against them in the past, this may prove to be harder than it would be otherwise, or it may cost more. One of the most reputable and reliable surety companies in the business is NFP, and we would love to have you contact us before any other company. With NFP, you'll enjoy the best rates, the best service, and the best support from any surety company.
You can usually apply for a bond online quickly and easily, especially with NFP, so that the entire experience is hassle-free. This can be very important if there is some urgency involved in acquiring your bond. Once you've paid for the bond, an indemnity agreement will be issued, and at that time it will have to be notarized and returned to the surety company. Then the bond itself can be issued, and you will have proof of bonding to show to the obligee in the transaction.