Surety Bond Kentucky
In Kentucky, they act as a form of insurance, in that they protect a hiring company or organization from the possibility of poor performance or non-compliance with the specifications of a particular job or project. Sureties have also been referred to as ‘risk transfer mechanisms’, in the sense that they reduce the risk taken on by a hiring company, and shift some of that risk on to another party in the bond transaction, the surety company.
They serve as a kind of guarantee that the terms of a work agreement will be lived up to by everyone concerned, and when that doesn’t happen, the aggrieved party can make a claim for restitution. One of the simplest forms of surety bonds in the state of Kentucky is the License & Permit bond, which is required of certain contractors as a condition of doing business within state borders. Electricians or plumbers might be one example of professionals who are required to be bonded by the state.
What is Surety Bond Kentucky?
Bonds are, in simplest terms, a binding contract between three parties who are involved with the same body of work being accomplished. The first party is the obligee, which is the company hiring a contractor to do a service, and it is the obligee which requires that contractor to obtain a bond as a guarantee of compliance and performance.
The contractor himself is the principal in this agreement, and the principal is obliged to get a bond as a condition of being hired for the job, and as a measure of security for the obligee that the terms of the agreement will be fulfilled. The surety company in this tri-party contract is the seller of a surety, and would be responsible for paying out some amount of money if the terms of the bond were to be unfulfilled.
How Do Sureties Work?
An obligee will ask a principal interested in working on a project to obtain a bond with a face value in the amount of any damages which the obligee feels will be needed to recover from non-compliance or poor performance on the project. The principal would then have to purchase such a bond from a surety company, and any rules, regulations, or performance stipulations would be included in the conditions of the bond.
If the involved principal then failed to live up to any of those specified terms, the obligee would have the right to make a claim against the bond for an amount equal to or less than the bond’s face value. Afterwards, the bonding company would then seek reimbursement from the involved principal for the entire amount of the claim made against the bond. This of course could be financially crushing to a principal, and would also damage his/her reputation in the area, making future bonding more difficult to obtain.
Common Types of Bonds
Kentucky and other states in the U.S. have literally hundreds of types of bonds which are available for purchase by principals. Most of these fall into two main categories, construction or contract bonds and commercial bonds. Construction bonds have several sub-types, including bid bonds, performance bonds, supply payment bonds, and site improvement bonds. All the other hundreds of bond types fall within the commercial area, and in fact, it is often said that there are only two types of bonds, contract bonds and everything else. Among the ‘everything else’ designation, you would find the most common commercial bonds like fidelity bonds, court bonds, fiduciary bonds, license and permit bonds, and public official bonds.
Industries that require sureties
While there are literally hundreds of industries which might take advantage of the protections offered by bonds, there are two industries which tower above the rest in terms of sheer volume of numbers: the construction industry, and government projects. Since there can be any number of contractors required on a major construction job, it’s easy to see why some guarantee of performance and compliance with regulations would be necessary. Without such safeguards, it’s doubtful that anything would ever get done with so many individuals contributing.
The government is also a huge consumer of bonds, and that refers to government agencies at all levels. All levels of government in this country have a responsibility to justify their expenditures and projects to taxpayers, who supply the funding for all those initiatives. In order to assure taxpayers that contractors paid to do a job or service will actually fulfill the terms of an agreement with the organization, a bond is commonly required by the various agencies.
Learn how to get bonded in Kentucky
How to get a surety bond Kentucky?
Acquiring a bond is not a difficult process, unless you’re a contractor who has had one or more claims filed against you for non-performance or non-compliance. For most principals, the process is fairly straightforward, and goes something like this:
- the principal researches the type of bond needed, and applies for that kind of bond with a surety company
- the surety company prepares an agreement of indemnity and returns it to the principal
- the principal signs the agreement, gets it notarized, and returns it to the surety bonding company
- the surety bonding company issues the bond
As can be seen from the above, the process can generally be accomplished without much hassle, in the space of a few days, or whatever is necessary for the back-and-forth flow of documents between principal and surety. To get the most expedited service, the most affordable surety bonds, and the most superior customer service available, contact NFP Surety to apply for your surety, and in a short period of time, you’ll have just what you need to bid on or to accept a contract arrangement with a hiring company.
NFP Surety provides affordable surety bond Kentucky and fidelity bond insurance. Every bond is prepared on a specific bond form, as prescribed by the entity requiring the bonding (known as the Obligee). Apply for your bond now by completing our surety bond application. Call us today to learn how to get bonded in Kentucky. We’d be happy to answer any questions you may have about surety bond Kentucky. Call us for all your bonding needs!