Protect Your Surety Program with Swallows Insurance
A surety bond is essentially an agreement where one party, the surety, promises to take responsibility if a third party (the principal) defaults. At Swallows Insurance, we offer more than just bonds—we bring decades of experience to help guide you in creating and maintaining a strong surety program.
Unlike others who simply forward your financial statements to surety companies, we go the extra mile. We take the time to truly understand your company and its financial health. We know what surety underwriters are looking for and what matters most to them. With this insight, we’re able to deliver the most competitive bond programs available and help steer your business in the direction you want to go.
A Few Key Definitions
Surety bonds come with some important terms that are good to know. Understanding these terms is essential when working with your bonds, as they help clarify the responsibilities and obligations of everyone involved.
Principal
The principal is the party who purchases the bond to guarantee that they will fulfill their obligations or complete a task. For example, a contractor getting a construction bond is considered the principal.
Obligee
The obligee is the party that receives the bond and is protected by it. This could be the project owner or a government entity requiring the bond to ensure certain obligations are met.
Surety
The surety is the entity that provides the bond and takes on the financial responsibility of ensuring the principal meets their obligations. This could be an insurance company or a specialized bonding company.
Bond Amount
The bond amount is the maximum sum the surety will pay out in the event of a claim. This is typically referred to as the penal sum of the bond.
Premium
The premium is the cost paid by the principal to obtain the bond. It’s generally a percentage of the bond amount and is influenced by factors such as the principal’s creditworthiness and the type of bond.
Bond Form
The bond form is the document that outlines the terms and conditions of the bond. It includes details about the principal’s obligations and the conditions under which the surety will make a payment.
Indemnity
Indemnity is an agreement where the principal agrees to repay the surety for any losses or expenses the surety incurs due to a claim made on the bond.
Expiration Date
The expiration date is when the bond becomes invalid. If the obligation continues past this date, the bond must be renewed or extended to remain effective.
Claim
A claim is a formal request made by the obligee to the surety for payment under the bond, typically due to the principal failing to meet their obligations.