Missouri surety bonds come in many varieties and serve several different purposes, but all of them have a similar underlying function. All bonds are required either as a guarantee of professionalism and business integrity, or as a simple condition of doing business within a given region.
Although similar to insurance, there is one key difference between insurance and bonds: who receives protection from each. In the case of insurance, businesses are protected against lawsuits, whereas with surety bonds in Missouri, the financial interests of the consumer are being protected. Very often, the "consumer" in a surety bond scenario is a government agency, rather than an individual consumer. This can be very important for such agencies, because they would not be able to absorb all the losses which might occur as a result of poor contractor performance.
What Is a Surety Bond?
A surety bond is a contractual agreement between three parties: a principal, an obligee and a surety company. The obligee is the party that requires the principal to obtain a surety bond as a condition of conducting business, and the principal is the party that actually would purchase the surety bond. The party selling the surety bond to the principal is a surety company, and the role of the surety company (apart from being the selling agent) is to provide a financial guarantee that the face value amount of the bond would be paid to the obligee in the event that the principal fails to live up to terms of the agreement.
How Does a Surety Bond Work?
The purpose of a surety bond is to provide a monetary assurance to the obligee party so that compensation can be recovered if a job is not completed satisfactorily, if faulty materials were to be used in the work, or if the principal were to simply disappear without doing the work at all. Since the principal has to buy the surety bond, there is already a financial investment on their part, and if work is not completed correctly, the obligee would have the option of making a claim against the bond amount, either for a portion of its value or for the entire amount.
Initially, the surety company would pay that claimed amount, but it would then seek to recover the entire amount from the principal, who caused the claim to be filed. It's easy to see that the principal would be the big loser if any claim were to be filed, so there is powerful motivation for a contractor to fulfill the terms of any agreement and avoid having a damaging claim filed against them.
Common Types of Surety Bonds in Missouri
As mentioned above, there are a huge number of surety bonds available from surety companies for purchase, but in the broadest context they all fall into two general categories: commercial surety bonds and contract surety bonds. Within these two categories, there are several sub-categories, and within these sub-categories, there are other sub-categories. Here is a summary breakdown of the various types of surety bonds:
Commercial surety bonds
- License and permit - auto dealer, insurance agent, mortgage broker
- Court - attachment, indemnity to sheriff, court cost bonds
- Fiduciary - administrator, guardian, trustee
- Public official - notary, tax collector, county clerk
- Fidelity surety bonds - ERISA, employee dishonesty, janitorial
Contract or construction
- Bid, payment, performance, subdivision, supply and site improvement
Industries that Require Surety Bonds in Missouri
Since there is an entire separate major category for the construction business, it's obvious that this is one of the biggest industries requiring the purchase of surety bond Missouri. Since 1998 when the Miller Act was first enacted by Congress, there has been a mandate in place that all federal construction projects must require contractors to post a bond of at least $100,000 on any major kind of project involving rebuilding, renovation or construction. Any project with a total cost of $150,000 or more is subject to the terms of the Miller Act.
This protects the government's financial interest, and by extension, the money which directly comes to the government from taxation of US citizens. Although not covered by the Miller Act, many states and municipalities have enacted very similar legislation that which requires surety bonding for public works projects that reach a specific monetary threshold.
From the other major category, that of commercial bonds, it can be seen that other industries that might require surety bonds are the court system, various governmental agencies, businesses which desire to protect themselves from employee dishonesty, and any other profession that requires licensing and bonding permits as a condition to conduct business within state borders.
How to Get Bonded in Missouri
It's usually not very difficult for you to procure your Missouri surety bond. First, you'll need to figure out exactly which type you need, and you can use the list above as a guide to help with that, or reach out to one of our experts. The obligee requiring you to purchase a bond will also be able to identify the specific kind of bond needed as a condition of employment.
Then you need to find a surety company that will sell you the kind of bond you need. Your first choice of surety companies should be NFP, where you'll always find the most affordable rates and the fastest preparation for your bond. You can usually even fill out an online application to expedite the process.
An indemnity agreement document will then be issued to you, which must be notarized for legal purposes and then returned to the surety company. Upon receipt of the agreement, the surety company will then be able to issue the actual bond to you, for the amount specified in the original application.
Our team provides affordable Missouri surety bonds and fidelity bond insurance. Every bond is prepared on a specific form, as prescribed by the entity requiring the bonding (known as the obligee). Below is a list of bond types that are commonly requested in Missouri.
Apply for your bond now by completing our online surety application. You can also call our office to get bonded in Missouri today.
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