It is difficult to imagine today's business environment without the presence of surety bonds. They have become a regular requirement for many different service providers and contracts. Ohio surety bonds are issued for multiple purposes, ranging from license bonds, auctioneer bonds, and business service bonds.
The underlying principle to the issuing of a bond is as follows; they are mainly used to offer a guarantee for services provided from one party to the other. As a result, most businesses that are licensed by the state are required to issue sureties to their clients upon entering a contract with them.
Understanding how Ohio surety bonds operate can be a bit overwhelming. It is therefore important to understand what they are, how they work, and if you will need one for your business or profession.
What Is a Surety Bond?
Simply put, a surety is an agreement between three parties to have a particular service delivered. It is a contract that legally binds the involved parties in order to ensure that the stipulations of a contract are fulfilled. A surety is normally issued when the recipient of a service needs a certain level of assurance from the service provider. For example, a company offering painting services to a commercial building may be required by the owner of the premises to issue a bond as a guarantee of their work.
The bond provides the building owner with an assurance that if the paint contractor doesn't do their work to the expectations of the contract, the owner can seek compensation for damages incurred. The bond can also protect the premises owner from the negligence of the contractor, such as situations where the contractor doesn't pay subcontractors. Getting bonded in Ohio is easy using our bonding process. We've been bonding businesses since 1984!
Understanding Bond Terminology
The recipient of the service is commonly referred to as the obligee, and the service provider is referred to as the principal. When an obligee requests a bond from the principal, the principal normally goes to an insurance company (the surety) to obtain the bond. If the principal violates the contract, the obligee can make a claim on the bond and be compensated by the surety.
Therefore, the surety acts as the party that honors any claims made against the bond. In such a case, the surety will pay the obligee for the damages, and later seek compensation from the principal. When a principal applies for a bond from the surety, the two parties agree on the terms of the bond. This includes the bond amount, monthly payment and how the surety will be compensated in case they have to pay out on a claim.
A Surety Solution Is Part Credit, Part Insurance
A surety serves two main purposes. It is an extension of credit to the principal and an insurance policy to the obligee. This is because the principal does not have to play a claim out of pocket in case they violate the terms of the contract with the obligee. The surety will pay any claims made, and the principal can then compensate the surety at a later date.
On the other hand, a surety acts as an insurance policy to the obligee. This is because they can seek compensation for damages incurred in the event that the contract is violated. Sureties can also protect obligees from damages caused to their property by the negligence of the principal. If you are ready to get bonded in Ohio, contact us today.
Types of Surety Bonds
Surety bonds occur in multiple forms and for many different purposes. Some of the most common applications of bonds include:
- License bonds - also referred to as commercial bonds, license bonds are used to protect the general public against negligence or damages caused by personnel that are licensed by the state. The state of Ohio licenses many different service providers, including plumbers, electricians, painters and motor vehicle dealers. The services offered by these personnel are widely used by the public, and thus the risk of damages occurring due to negligence is real. By requiring these personnel to be bonded, customers can seek to get compensation for any damages incurred.
- Freight broker bonds - these are commonly issued to freight brokers and freight forwarders in Ohio in order to protect the goods of customers in transit. Any business that operates as a freight broker is required to purchase a $75,000 surety, to receive a freight broker license. A freight broker bond enables a client whose goods are in transit to be compensated in case their cargo is damaged.
- Business service bond - covers businesses that employ individuals who will work in people's homes. They cover the business against negligence, theft or damages that their employees may carry out on a client's property. Business service bonds allow clients to have more confidence in the services of the company because they can be covered in the event that damages are incurred. The amount of a business service bond will depend on the number of employees in the business and the nature of their services.
- Auctioneer - people working as auctioneers (or who own auction galleries/firms in Ohio) need to obtain an auctioneer bond. The bond is required by the Department of Agriculture (Auctioneer Program Division) in order to protect those participating and purchasing items from an auction. These auctions require a $25,000 or $50,000 surety, depending on the type of auction.
Getting Bonded in Ohio
Obtaining an Ohio surety bond has been made easier through the use of technology. You can now simply contact a bond provider by phone or online in order to fill out an application. If you're not sure of the type of bond that you need, bond companies can guide you through the steps required to select the right bond for you or your business.
The process involves filling out an application where you provide your personal information as well as information about your business. The company may need to carry out a credit and financial check, to determine your financial situation and your ability to honor the bond.
Most Ohio surety bonds will cost between 1%-15% of the total bond amount. The rate that you will actually pay depends on the type of bond you need, your financial status and the nature of your business. Most people with stellar credit qualify for lower interest bonds.
Due to the large variation that is involved in sureties, it is best to work with a bond provider that can guide you in selecting the right bond, at the best rates available.
Our team provides affordable Ohio surety bonds and fidelity bond insurance. Each bond is prepared on a specific bond form, as prescribed by the entity requiring the bonding (known as the obligee). Apply for your Ohio surety bond now by completing our online application. If you prefer, instead of an online bond form, you may download an application to complete and fax or email to our bond agency for processing. Below is a list of commonly requested bond types in Ohio.
- Actors
- Adjuster
- Agent
- Auction
- Broker
- Business
- Car
- Construction
- Contractor
- Court
- Dealer
- DMEPOS
- Federal
- Fidelity
- License
- Lien
- Medicare
- Mortgage Broker
- Notary Public
- Private Investigator
- Process Server
- SAG
- Sales Tax
- Defective Lost Title
- Utility Deposit