INSURANCE SERVICES

A surety bond is a contract between three parties—the principal (you), the surety (us) and the obligee (the entity requiring the bond)—in which the surety financially guarantees to an obligee that the principal will act in accordance with the terms established by the bond.

To put it simply: how a surety bond works is that a guarantee is made that specific tasks will be fulfilled. This is achieved by bringing three parties together in a mutual, legally binding contract.

• The principal is the individual or business that purchases the bond to guarantee future work performance.
• The obligee is the entity that requires the bond. Obligees are typically government agencies working to regulate industries and reduce the likelihood of financial loss.
• The surety is the insurance company that backs the bond. The surety provides a line of credit in case the principal fails to fulfill the task.

The obligee can make a claim to recover losses if the principal fails to fulfill the task(s). If the claim is valid, the insurance company will pay reparation that cannot exceed the bond amount. The underwriters will then expect the principal to reimburse them for any claims paid.

There are over 50,000 bonds in the U.S. and bond requirements, amounts and regulations are typically set at the state level.

Here are some of most common types of surety bonds in the State of California:

Tax Preparer Bond: Required if you help clients with tax returns or provide any other tax-related services in California.

Contractor License Bond: Required for individuals who construct or alter any structure contracted for $500 or more.

Defective Title Bond: Required if you own a vehicle with insufficient proof of ownership in California.

Car Wash Bond: Required if you operate a commercial car wash in California.

Motor Vehicle Dealer Bond: Required for individuals who sell more than 25 vehicles per year.

Insurance Broker Bond: Required if you negotiate insurance agreements on behalf of consumers in California.

Immigration Consultant Bond: Required if you prepare immigration paperwork for the public in California.

• Finance Lender/Broker Bond: Required for finance lenders and brokers prior to conducting business in California.

Don’t see the the bond you are looking for? No problem! One of our experts at Ocean Pointe Insurance Solutions will find it for you!

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