Surety Bonds

How Surety Bonds Work

Surety Bond — Construction Site in Cleveland, OH

When your project requires a surety bond, turn to A1 Bonds for professional service!

Surety bonds are contracts established between three parties—the principle, the surety, and the oblige—that guarantee obligations regarding a project will be met.

The Obligee – The party that is requiring the surety bond
The Principal – The party that is responsible for fulfilling an obligation as part of the bond
The Surety – The party that assures the obligee that the principal will fulfill the contractual obligation.

Under a surety bond, the surety agrees to compensate the obligee in the event that the principal does not meet the obligations of the contract. Surety bonds are formed to establish the creditability of the principal and guarantee that the obligee will not suffer financially should the principal not meet the obligations.

What Happens If a Claim is Filed on a Surety Bond

To establish a surety bond, the principal pays a premium to the surety bond company. If the obligee files a claim against the principal, the surety will investigate the claim and pay the obligee if the claim is valid. After paying the obligee to resolve a claim against the surety bond, the surety will seek reimbursement and payment for any legal costs from the principal.

The solvency of the surety on a bond is usually verified by government regulation, private audit, or both, to ensure that the surety company is in position to meet the needs of the bond.

What is a Penal Sum?

The penal sum is the maximum amount that the surety would pay if the principal defaults on the contract. This sum allows the potential surety to assess the risk in providing the bond. The premium that the principal must pay is adjusted according to the penal sum.

Speak with Us About a Surety Bond in Cleveland, Ohio

For more information about surety bonds or to speak with a representative and establish a bond, call A1 Bonds at (216) 781-2221 & (419) 450-6800 (Toledo).