Individual Surety Bonds

Although there are some similarities to insurance policies and surety bonds, there are still quite a few glaring differences that must be examined before making a decision as to whether or not you want to invest your money in them. Unlike a traditional insurance policy, surety bonds do not protect the policy-holder but rather a third part which is referred to as the “Oblogee”. Surety bonds are necessary when an organization, group, or individual is expected to do something. Insurance policies make it their jobs to anticipate financial loss which will need to be covered, but that is the not the case with surety bonds; loss is not anticipated from the beginning. Sometimes businesses that sell alcohol are notified by the Liquor Control Board that they need to purchase surety bonds, though this is not the case for everyone.

Those who are operating businesses which fulfill certain requirements of the government on a state level or need to get a license of some sort will want to look into getting surety bonds to ensure financial security. These bonds and insurance policies are both a means of transferring risk and covering financial losses in the event that such a situation arises. Surety bonds are three party agreements which consist of the Obligee, a Principal, and a second party. The obligee is the organization, group, or individual who is owed a certain amount of money and the third party (the guarantee) is the one who promises to cover all financial losses in the event that the principal part defaults for any reason whatsoever.

The principal and guarantee parties enter into a contract together which promises full reimbursement in case the Obligee defaults obligation. In the event that the principal party does not default, the guarantee will be responsible for providing all of the funds to the obligee; an amount which is been agreed upon in advance in the signed contract between all of the parties involved.  The principal party still has an obligation to completely reimburse the guarantee because this part is granted all of the same rights as a lender is having all of their losses covered in full. Premiums for surety bonds can vary greatly depending on which company acts as the guarantee. Usually premiums for these types of bonds will cost around one or two percent of the total amount.

Those who are interested in getting surety bonds will want to turn to insurance agencies which issue them. Insurance agencies represent a wide variety of guarantee companies. A majority of insurance agencies will not be able to give you extremely detailed or even accurate information about these bonds because it is not their specialty; however there are a number of other sources you will be able to turn to when looking for the best deals on them. Individual surety bonds are recognized by the U.S federal government and because of this they are considered to be extremely secure and reliable.

There are also a number of differences between corporate and surety bonds, one of which is the fact that with the latter the actual assets which are backed by the bond are specified. Corporate bonds are only general and do not supply this type of information which is certainly good to have. All individual surety bonds are required by the federal government to be completely backed, so when you invest in these you will be able to have peace of mind. The whole point of these is to make a sort of security net for the part who is the obligee. One reason to choose individual surety bonds over corporate bonds is that the corporate bonds are not backed and therefore can fall through under the right circumstances, something which absolutely cannot happen to surety bonds.  The main question is whether or not obliges should surety bonds altogether, and history indicates that having them is a good idea overall.

Another reason to choose surety bonds is that they are not subject to the same kind of stringent requirements as corporate bonds are. There are no state licensing requirements so in a way they are much simpler. The federal government puts no maximum limit on the size of each bond which individual sureties accept, so in many ways they are ideal for those who want this kind of financial protection. It is important for you to learn about and understand individual sureties as much as possible before making a decision as to whether you want to invest in them yourself.

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