Surety bonds are like insurance policies that are intended to protect clients from contractors or commercial salespeople who fail to fulfill their obligations to them. Bonds are essentially a contract between three parties: a principal, an obligee and a surety. The principal is the individual or business who is supposed to provide a service to a client, the obligee is the client, and the surety is the party who sells the bond. Even though a bond is intended to protect the obligee, it is a principal who is responsible for purchasing the bond.
They are often required of contractors and professionals in industries such as auto sales and real estate for licensing purposes. The requirements for who needs to acquire a bond vary from one state to the next, so you will need to speak to an insurance professional to know the laws regarding bonds. Let us show you how to get bonded today!
How Does a Bond Work?
There are different types of Montana bonds for different industries and scenarios, but most of them work in roughly the same way. As mentioned, a surety works as insurance to an obligee even though it is the principal who is required to purchase the bond. An obligee is a client of the principal, which means the principal has an obligation to provide a service to the obligee (client). If the involved principal fails to provide that service, the client can file a claim against the bond. Should the claim be found to be valid, the surety - the insurance company who sold the bond in the first place - will reimburse the client according to the terms of the bond. It is then up to the involved principal to reimburse the underwriters of the bond for what was paid to the obligee.
Who Is Required to Purchase Bonds?
Most sureties are written for contractors in the construction industry, especially for government projects and any projects that will cost over $100,000 to complete. Commercial bonds may also be required of professionals who sell new and used automobiles. These bonds are required for licensing purposes and are generally required for anyone selling more than one or two vehicles. In other words, someone selling one used vehicle won't need to purchase a surety, but someone who owns a used car lot and who acquires vehicles for the sole purpose of selling them will need a bond for licensing purposes. Sureties may also be required for government officials who work closely with the general public, real estate professionals and legal professionals who might provide a court-supervised trust. Our staff can help you find the Montana surety bonds that you will need for your business. We'd appreciate the opportunity to earn your business and answer any questions you may have.
What Are the Different Types of Bonds?
Even though there are different kinds of bonds available, the majority of them can be categorized as either commercial or contract bonds. Contract bonds are required of contractors in the construction industry, either for government and public works projects or any construction project with a price tag of over $100,000. These bonds can be placed into of these categories:
- Bid
- Performance
- Payment
While contract sureties are required for contractors for construction projects, commercial sureties are needed by individuals or businesses who provide other services. This is a wider category than contract sureties, but most can still fit into one of the following categories:
- Miscellaneous sureties
- Court
- License and permit
- Fiduciary sureties
- Public official
Because the laws and requirements for bonds can be complicated, you should always work closely with an insurance company to make sure that you obtain the bonds that suit your needs. If you have any questions about the kind of bond that you will need, don't hesitate to contact our office today.
How to Get Bonded in Montana?
Our team is here to help. We provide affordable bonds of all types and amounts.
If you are ready to get your bond, or have any questions about surety bonds Montana, please call us today. Our easy going bonding process will put your mind at ease. Apply for your bond now by completing our online application.
Most bonds can be issued the same day, so let us know when you're ready to get started.