Surety bonds are similar to insurance in that they provide a kind of guarantee to one of the parties involved. If the terms of the bond agreement are not fulfilled, then a claim can be made, and the party making the claim can recover losses sustained. Surety bonds are often required as a condition of doing business within state borders, as a means of protecting consumers who avail themselves of a business' services.
For instance, the state of Maryland requires an electrician to be bonded before offering services in the Baltimore area, and that provides some measure of assurance to clients that the electrician will perform in a competent and legal manner. If the work does not meet that requirement, then the company which issued the surety bond to the electrician would be responsible for paying out claims damages, and would subsequently seek to recover the amount of the claim from the electrician.
What Is a Surety Bond?
Essentially, they are a contract between three parties as depicted in the scenario above. The electrician would be the principal party, the state of Maryland would be the obligee, which is the organization or company requiring the principal to purchase the bond, and the surety would be a finance company that issues the bond and is liable for any claims made against it.
The purpose of a surety bond is to provide a measure of confidence that the principal will act in accordance with laws and regulations or standards of performance. Failing that, a claim can be made against the surety bond up to the full face value of the bond, or for any lesser amount that covers the degree of damage assessed.
How Does a Surety Bond Work?
The way surety bonds work is to protect consumers against malpractice and poor performance from professionals hired to do work, and in some of the most common scenarios, it protects government organizations from contractors who fail to live up to the terms of their agreements. Sureties can provide a powerful incentive for principals to do competent, quality work and to abide by any laws or regulations associated with execution of that work, because ultimately the principal would have to compensate the surety company for any claims paid out. At the same time, any principal who has a claim made against them will suffer reputational damage, and may find it difficult to be hired by government organizations (or individual clients) in the future.
Common Types of Surety Bonds in Maryland
There are two main categories of sureties, one being commercial and the other being contractor construction bonds. The primary application of construction bonds is to guarantee that any contractor will complete his portion of a construction project according to the specifications of the job, and that the contractor will guarantee payment to all subcontractors and suppliers. The various types of construction sureties include bid bonds, site improvement bonds, supply bonds, subdivision bonds, payment bonds and performance bonds.
Commercial bonds are broader in their various applications, and include a wide range of different types. License and permit bonds include many different types of bonds like mortgage broker bonds, insurance agent bonds, and auto dealer bonds. The subcategory of fidelity bonds takes in such types as janitorial bonds, employee dishonesty bonds and ERISA bonds.
Examples of court bonds are attachment bonds, court costs bonds and indemnity to sheriff bonds. Fiduciary bonds are most commonly in the form of guardian bonds, trustee bonds and administrative bonds. Some examples of public official bonds include notary bonds, tax collector bonds and county clerk bonds.
If you contact us, we will gladly teach you how to get bonded in Maryland. NFPÂ has been the leader in bonding since 1984, and we would appreciate the opportunity to get you bonded in Maryland. Call us today, or apply online on our website.
Industries that Require Sureties
As can be seen from the above, one of the industries most commonly requiring bonds is the construction industry, and understandably so. If there were no guarantees against shoddy workmanship or living up to local laws and regulations, such poor performance might be a very common thing. Apart from the performance aspect however, another main thrust of construction surety bonds is to ensure that all subcontractors and suppliers receive payments for their goods and services, so they don't get left holding the bag by contractor. Let our team show you how to get bonded in Maryland.
It's also easy to see why government organizations would be a common obligee in the surety bond contract model. Many government projects can be very large and involve a great deal of money, and if contractors hired to do work failed to fulfill the terms of an agreement, taxpayers money would be wasted at an alarming rate. For this reason, government organizations at all levels frequently require contractors who bid on jobs to be bonded, because all levels of government have this same obligation to account to constituents about how funds are being spent in their best interest.
How Can I Get Bonded in Maryland?
Obtaining a bond is a fairly simple process, provided that as a contractor you have not had claims made against you in the past. If you have had claims made against you before, it may be more difficult to find a surety company that will work with you. The first in the process is to identify exactly which type of surety you need as a condition of work you are bidding on. In most cases, the obligee can identify the specific type of bond that is required for the job.
Next, it will be necessary to find a surety company willing to issue the type of bond you're looking for, and in the amount required by the obligee. The surety company will then issue an indemnity agreement to you, which lists the terms that will be included in the bond agreement. This must be notarized and returned to the surety company, and at that point, the bond can be issued to you.
If you are a principal in need of some type of surety bond, contact us, and we will be happy to answer all questions you may have, and discuss how we can provide you with the right kind of bond to fit your needs.
At NFP, we provide affordable surety and fidelity bond insurance. Each MD surety bond is prepared on a specific bond form, as prescribed by the entity requiring the bonding. Below is a list of commonly requested surety bonds in Maryland. Apply for your Maryland surety bond now by completing our online application.
- Actors
- Adjuster
- Agent
- Auction
- Broker
- Business
- Car Dealer
- Construction
- Contractor
- Court
- Dealer
- DMEPOS
- Federal
- License
- Lien
- Medicare
- Mortgage Broker
- Notary Public
- Online
- Private Investigator
- Process Server
- SAG
- Sales Tax
- Title
- Utility Deposit