Surety Bonds New York
Surety bonds have become a regular requirement in many different industries. They involve a legally binding contract between 3 parties, and are used to guarantee the quality, safety and reliability of services offered by companies.
New York surety bonds are required in many industries within the state, and are therefore highly sought after products. Some professions may even require you to take out a bond just to work within those professions.
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What is a surety?
Let’s begin by defining what a surety bond is. In the simplest terms, a surety is an agreement/contract signed between 3 parties- the principal, obligee, and surety. In many different industries, a company (the principal) may need to guarantee the other party to a contract (the obligee) that it will fulfill the obligations that it has stipulated. For example, a construction company may need to guarantee a real estate investor that they will design a building in a certain way and in a certain amount of time. In fact, New York Surety Bonds are often issued for construction projects.
In such a case, the real estate company (the obligee) may require some sort of assurance that the work will indeed be completed according to the guidelines stipulated in the contract. Therefore, when the contract is signed between the construction company and the real estate investor, the construction company issues a bond to the investor to guarantee them that they will get the job done or else they will have to compensate the investor for damages.
But in order to avoid the possibility of paying for any potential costs upfront, the construction company purchases the bond from a surety company. A surety company is basically an insurance company that guarantees the fulfillment of the bond. The construction company (the principal) obtains a bond from the insurance company (the surety) and provides it to the obligee as a guarantee of services to be fulfilled.
Surety bonds insure the obligee against damages
The purpose of a surety bond is therefore to insure an obligee against any damages that they might incur as a result of the principal not fulfilling the terms of the contract. If the involved principal does not fulfill the contract as agreed upon, the obligee can file a claim to the surety to seek compensation for damages. If this happens, the amount that the surety has to pay out to the obligee will need to be repaid by the principal. The principal would have to repay the entire bond amount, plus all legal charges that are incurred during the claims process.
Bonds act as a line of credit that is extended to a principal when issuing a bond. This is because the surety is the one who will be responsible for paying the obligee in the event of a claim that is filed. The principal will therefore not have to deal with any immediate out-of-pocket expenses when a claim is filed. They will, however, have to repay the surety according to the terms that have been agreed upon by the two parties.
Types of New York Surety Bonds
Surety bonds are used by both individuals and businesses to insure themselves against the services that they offer. There are many different types of bonds that are issued, some of which include:
Contract bonds – Contract bonds are issued to guarantee that a contractor will stick to the specifications of the construction contract. The owner of a project may require a contractor to issue them with a bond that assures that they will pay all subcontractors, perform the project to the minimum specifications of the contract (performance bonds), and handle all costs related to labor and supplies.
Commercial bonds – Commercial bonds are issued to protect businesses against any liabilities they may incur as a result of their operations. State laws might require various industries to issue bonds to their clients so they can be able to guarantee their services. Bonds are typically required of contractors in the auto industry, agricultural industry, service industry, etc.
Fidelity – Fidelity bonds are designed to protect your business against any damaging actions of employees. Cases of employee theft, damage to your customers’ property, and employee dishonesty can be covered under a fidelity bond.
Industries that Require Bonding:
There are several industries that require bonds in order for the business to operate. These include:
Construction Industry – Any construction project that is carried out at the state or federal level will require a surety bond from the contractor before they can begin working. This is because the government wants to safeguard the interests of the taxpayer as well as taxpayer dollars before they use them on a construction project.
The federal government, therefore, requires that any construction project that will cost $150,000 or more to be carried out by a bonded contractor.
Licensing Industries – Most industries that require the person to be licensed by the state or federal government in order to carry out their profession often require sureties. These industries include motor vehicle dealers, plumbers, electricians, etc.
Legal Industry – In the legal profession, a plaintiff may require a court bond to protect themselves and their assets during court proceedings. For example, a plaintiff to a case may be required to pay damages suffered by a defendant if the case is ruled in favor of the defendant. The plaintiff would, therefore, be required to issue a bond that guarantees payment of these damages.
How to get bonded in New York
In order to obtain a surety, you need to contact a surety provider and apply for the bond that you require. Most bond providers make it easy to submit an application by allowing you to apply online. They also work with you to help determine the best bond that suits your needs. In order to determine the cost of issuing the bond, they may check your credit and the references that you provide.
Most New York sureties issued will cost between 1% and 20% of the total value of the bond. The overall bond process thus involves the bond application, determination of the value/premiums, signing of the bond agreement, and issuing of the bond to the applicant. Call us today, and learn how to get bonded in New York today! Industry leaders since 1984!
NFP Surety provides affordable New York surety bonds and fidelity bond insurance. Every NY bond is prepared on a specific NY surety bond form, as prescribed by the entity requiring the bonding (known as the Obligee). Below is a list of kinds of surety bond New York.
Apply for your surety bonding program now by completing our online application.
If you prefer, you may download an application to complete and fax or email to our bond agency for processing. Contact us today to learn how to get bonded in New York!
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