Virginia Surety Bond
Basic Facts for Those Who Needs to be bonded in Virginia
If you are someone who discovers they require Virginia surety bonds, you can take comfort from the fact that many who find themselves in the same position also find themselves confused. After all, just what is a surety bond? What does it involve? Let’s take a few minutes to better understand the basics of bonds, and then explore how VA bonds may protect your interests.
[if you are ready to get Virginia surety insurance, please reach out to us today. Some bond types can be done in a day! Apply in just minutes. You will appreciate our simple approach to bonding. We’re sure of it!]
What Is a bond?
The U.S. Small Business Administration, or SBA, defines the sureties in this way: “A bond ensures contract completion in the event of contractor default.” Now, initially, that might not seem all that helpful as far as definitions go, but once you understand the actual structure of the bond, it becomes clearer.
Thus, it is better to look at a broader definition of it, and think of a bond as a contract that exists to ensure that all obligations are met between
- The agency or individual in need of the bond (the principal)
- The agency or individual requiring the bond (the obligee)
- The agency providing the bond (the insurance company)
So, let’s say that a contractor (the principal) wins a contract from a project owner (the obligee). The project owner requires their contractor to provide them with a bond as a form of protection should they default on the work they are supposed to do or complete. Should that contractor fail to meet the terms of the contract, the agency providing the bond will have to either compensate the project owner for losses incurred by that contractor’s failure, or find another contractor to complete the work or contract as indicated.
Does this mean that it is basically a form of insurance for the obligee? Yes, that’s fair to say as they are the direct beneficiaries and can make claims if the bond’s conditions are not met. Yet, it is also considered a form of credit extended to a principal as they will be obliged to repay the insurance company (also known as the surety) if a claim is made against the bond.
In most instances, the obligee is a government agency, and a bond exists to protect that agency. The government agency often requires all contractors to pay for the bond, but may reimburse costs associated with them at successful completion of a project.
In that light, a bonding makes a lot of sense and it may be surprising to how often they are misunderstood. And this is not helped by the fact that they differ from project to project. Actually, there are four types of bonds; let’s learn a bit about them now…
Virginia Surety Insurance
Types of Virginia surety insurance
They come in several styles, and will vary based on the needs of the project.
- Bid bonds – These are to ensure that any bidder on a specific contract will in fact enter into that contract and supply the funds for the bond (usually a performance bond) if given the contract.
- Payment bonds – This kind are in place to guarantee that subcontractors and suppliers receive the agreed upon payments for any work done under the contract.
- Performance bonds – They are put in place to ensure that the contract is going to be completed in strict accordance to the conditions and terms the contract has outlined. This can also be called a contract bond.
- Ancillary – These ensure that all requirements not related to performance within the contract are met.
- Commercial bonds – This type are a bit unusual in that they are more general and are often necessary for a business or individual to obtain or maintain specific permits or licenses. They are also described as annual bonds because they require renewal. They are also called license bonds and permit bonds.
- Fiduciary bond – Another type of bond is the fiduciary, also known as a probate, administrator, executor or guardianship bond. It is insurance for beneficiaries and creditors if the fiduciary fails to perform competently or honestly.
As we can see, not all bonds relate specifically to business dealings, though a vast majority of surety buyers are purchasing for contractual reasons. Now, if you are someone who has discovered they require Virginia surety bonds, it is likely that you have won or are considering a contract for some sort of federal project in the state of Virginia. If so, it is likely that the contract is going to be valued at roughly $150, or more, and you may require several of the bonds outlined above.
However, don’t be surprised if you are seeking a contract for a state, municipal or private contract and see a surety clause or two in the terms. As the SBA reminds us, “Many service contracts, and occasionally supply contracts, also require bonding.”
Surety Bond Companies in Virginia
Surety by NFP provides affordable surety and fidelity bond insurance. Every surety is prepared on a specific VA bond form, as prescribed by the entity requiring the bonding (known as the Obligee). Below is a list of surety types that are commonly requested in Virginia.We are the industry leader in all kinds of surety bond Virginia. Contact us for all your bonding needs!
Apply for your a Virginia surety insurance now by completing our online surety bond application.
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- Agent / Promoter
- Mortgage Broker
- Notary Public
- Private Investigator
- Process Server
- Sales Tax
- Defective Lost Title
- Utility Deposit