Surety Bond Applications

• A surety bond holds both the owner of the project and the contractor hired to work on the project to specific guidelines set down in the bond. If the contractor does not perform as required, he must pay for the owner's lost time, materials, funding and any other expenses incurred. This makes surety bonds ideal for large projects where completion is vital. Government organizations use surety bonds in almost all their outside contracts.
  
  

Surety Bond Parties

• There are three surety bond parties. The first party is the owner, who wants a specific type of work done. The second party is the contractor or contracting organization, which the owner hires to perform the work. The contractor creates the surety bond, but creates it through the third party, a surety agent who draws up the bond and mediates the relationship between owner and contractor. It is this surety agent who actually issues the bond.
  
  

Surety Agent Role

• Surety agents have an important role in the surety bond process. Since both the owner and contractor have an interest in the project, they investigate if either side claims that the bond has not been fulfilled. If the agent finds this is the case, the agent will pay the owner directly for the expenses incurred (often up to a certain amount), and then collect this money from the contractor in due time.
  
  

Source of Bond Agents

• Most bond agents are commercial. The most common source for bond agents are insurance companies. Since surety bond and insurance policies are similar, insurance companies find it easy to train surety agents and set up a surety agency department within their company.