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A surety bond offers a guarantee from a third party to a beneficiary, that an agreed sum of money will be payable to the beneficiary in the event that a company fails to deliver on its contractual obligations.
It provides protection against unforeseen financial challenges in a construction project and can safeguard contracts from insecurity and risk.
Surety bonds use a guarantor to offer financial securities for work to be carried out and provide an alternative to bank guarantees or letters of credit.
The bond is an agreement between three parties: the principal, the surety and the obligee.
A surety bond offers a guarantee from a third party (the guarantor or surety) to a beneficiary (the obligee) that an agreed sum of money will be payable to the beneficiary in the event that a company (the principal or supplier) fails to deliver on its contractual obligations.
The obligee may require the principal to take out the surety bond as a form of protection. The surety bond protects the obligee from violations of contracts or unethical business practices; it assures that the work will be completed based on the contract. The surety company becomes responsible for the contract, obligation or debt.
Surety bonds are used as a guarantee against unforeseen financial challenges that may arise with the principal.
There are two types of surety bond available.
Surety bonds can be used for assurance in projects, terms of commercial licences or permits and to guarantee payments.
A clear benefit is the involvement of the guarantor or surety. As part of the underwriting process, we carry out thorough risk analysis of the company we are going to guarantee. We carefully check our contractors and then work with them to meet obligations within a given timeframe.
Surety bonds support industry standards by offering customers a way of making sure companies provide high standards of goods and services.
We have dedicated specialists in the surety market as well as international capabilities through our parent company Gallagher. This gives us a wide international representation, buying power and a distinct edge in delivering value to our clients. We offer industry leading expertise in the provision of both contract and commercial surety bonds.
Contact one of our construction specialist broker today to learn more about bonds or more cover options for construction projects.