Surety Bonds North Dakota
What Are Surety Bonds?
They are a type of insurance that protect clients and ensure that individuals or businesses render the services that they were hired for. A surety is essentially a contract between three parties: a principal, an obligee, and a surety. The principal is the party that provides the service and the one who needs to purchase the surety, the obligee is the principal’s client, and the surety is the company that sells the surety to the principal. If the principal fails to fulfill their obligations to the obligee, the obligee can be compensated according to the terms of the surety bond.
North Dakota surety bonds are required for industries such as real estate and automobile sales, but they are almost always a must for contractors in the construction industry. There are different requirements for different states when it comes to bonds, so speak with an underwriter to find the North Dakota surety bonds that are right for your business. If you are unsure what type of surety you need, contact us at NFP Surety. We are the industry leader in surety bonds North Dakota, and have been so since 1984. Call our friendly & professional staff today. We’ll teach you how to get bonded in North Dakota.
How Does a Bond Work?
There are several different types of bonds that you can purchase, so it can be confusing to know exactly what you need. Fortunately, most bonds work in roughly the same way. As we said before, a bond is a contract between a principal, an obligee, and a surety. The principal purchases a bond from a surety, but the bond mainly protects the obligee. When the obligee hires the principal to perform a certain service, the principal is obligated to do so. If the principal fails to hold up to their end of the bargain, the obligee can file a claim against the surety bond. If the claim is found to be valid, the obligee is reimbursed by the surety according to the terms of the bond. It is then up to the principal to reimburse the surety for the amount that was paid to the obligee.
What Industries Require Surety Bonds North Dakota?
Most sureties are written for the construction industry, especially for any government and public works projects. They are also required for any large construction project that has a price of over $100,000. Commercial bonds are also usually required for automobile sales and real estate for licensing purposes. Whether or not you need a bond as an automobile dealer will depend on how many vehicles you are selling. Selling one used vehicle won’t require a bond, but having several that you are planning to sell as part of a business will require you to purchase a bond.
What are the Different Types of Bonds?
There are several different types of bonds available, but most of them can be categorized as either contract surety bonds or commercial surety bonds. Contract surety bonds are necessary for construction contractors who are involved in a government or public works project, or a project that carries a price tag of at least $100,000. Contract bonds can themselves be placed into one of three categories:
- Bid – A bid bond provides protection to an obligee should a successful bidder back out of a project after they’ve already committed to it and received payment. It essentially reimburses the obligee for services that were promised but never rendered.
- Performance – A performance bond is used to reimburse an obligee if a principal renders services in an unsatisfactory manner. The project may have technically been completed, but not to the standards that were promised.
- Payment – Most construction projects require subcontractors, suppliers, and other professionals that the principal needs to bring in from outside of their company. A payment bond ensures that all of these workers receive proper payment for their services.
While contract bonds are required of contractors in the construction industry, other businesses may require commercial bonds for licensing purposes. Like contract bonds, commercial bonds can be split into different categories:
- License and Permit – These are sureties that are required for licensing purposes. Individuals in the auto sales industry and in real estate often needs these bonds to operate in the state of North Dakota.
- Court – As their name implies, court bonds are required in many court cases. Both the defendant and the plaintiff can purchase a court bond to protect the rights of the opposing party.
- Fiduciary Bonds – A fiduciary bond is needed for anyone providing court-supervised trust.
- Public Official – Certain public officials need this type of commercial bond in order to protect the public from malfeasance should the officials fail to fulfill their duties.
- Miscellaneous Bonds – Miscellaneous bonds are any surety that doesn’t fit into the above categories.
How Do Sureties Protect Principals?
Even though it seems like bonds only protect obligees from wrongdoing, they do have some benefits for principals as well. First of all, many businesses need to purchase a bond to be licensed to operate in North Dakota. As we’ve stated a few times before, this is often the case for automobile sales and real estate. Even if you don’t need a bond to do business, it is still in your best interest to obtain one as a show of good faith for your clients. It says that you will be true to your word and fulfill all of your obligations. If you don’t fulfill your obligations, your clients can rest assured in the fact that they will be reimbursed for what they’ve paid. Finally, purchasing a bond can help you build your credit if you are a new business without a lot of history.
For more information about North Dakota surety bonds or to find the bond that fits your needs, contact us today.
How to get bonded in North Dakota
NFP Surety provides affordable North Dakota surety bonds and fidelity bond insurance. Every bond is prepared on a specific ND 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 North Dakota.
Apply for your North Dakota surety bond now by completing our online application. Learn how to get bonded in North Dakota from one of our experienced bonding agents.
If you prefer, you may download an application to complete and fax or email to our bond agency for processing.
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