Sureties in Connecticut come in a variety of types, all of which are available for purchase through NFP, one of the largest and most respected sellers of surety bonds in the country. One of the most popular types of bonds are license and permit bonds, required by the state of Connecticut as a condition of doing business within state borders. The intent of license and permit bonds, as with all bonds, is to provide a certain level of protection to consumers from any form of malpractice or non-compliance which a contractor or business professional might be guilty of.
What Is a Surety Bond?
A bond is, in essence, a contractual agreement between three parties: a principal, an obligee and a surety company. The surety company in this tri-part model sells the bond to a principal, and the surety would then be responsible for paying out any claims made against that bond if the principal were to fail to live up to terms of the bond. The principal must buy the bond because the obligee requires it as a safeguard against poor performance or non-compliance with either the regulations or the stipulations of the bond. The obligee in this scenario is the company or organization (often a governmental agency), which mandates the purchase of a bond to protect itself and to increase the likelihood that all conditions specified for project completion are complied with.
How Does Bonding Work?
In actual practice, once a bond has been issued to a principal, that contractor or professional person is obliged to live up to any terms specified in the bond regarding rules, regulations, tasks or standards of performance. If one or more of those terms are not fulfilled in the opinion of the obligee, that party would then have the right to claim the bond, in an amount equal to or less than the face value of the bond, depending on the degree of assumed damage.
In such a case, the surety would be required to pay the amount of the obligee’s claim, and then pursue the principal to make full restitution for the money it had to pay out to the obligee. The intent behind this working model is to protect the obligee and to ensure that all work is done is following standards expected by the obligee.
As an example, if the obligee was a municipal government agency hiring contractors (principals) for a public works project, the intent of a bond required of all contractors would be to guarantee that taxpayers’ money was not being misspent or wasted if sub-standard work were to be performed or if a contractor failed to complete all terms of the project. If that did happen, a monetary claim against the bond would reimburse the municipal agency for any damages.
Common Types of Surety Bonds
The two primary categories of bonds in the state of Connecticut, as in most other states, are construction bonds (sometimes referred to as contract bonds), and commercial bonds. Within the broad category of construction bonds, there are bid bonds, payment bonds, performance bonds and site improvement bonds.
The commercial bonds category includes pretty much every kind of bond not listed under construction bonds, a range which includes hundreds of different types of bonds. Some of the more common types of commercial bonds available for purchase in Connecticut are fiduciary bonds, court bonds, license and permit bonds, public official bonds, tax bonds, fidelity bonds, and probate bonds.
Industries that Require Surety Bonds
Two sectors that feature surety bonding as an integral component of their industry are the construction business and all levels of government, from federal agencies on down to town or village level government organizations. It’s easy to see why government bodies would require some form of guarantee of good performance since they should satisfy their tax-paying constituents and to account for expenditures on any works affecting the public.
The construction industry is another very heavy user of sureties because some kind of assurance of quality work must be in effect to ensure that individual contractors perform up to expected standards. Especially on very large construction projects, not all contractors can be known and trusted by the primary contractor or project organizer. That means there must be some form of trust or confidence that individual contractors will live up to the terms specified for the project, and that all local regulations will be complied with.
Bonding represents a fairly powerful motivation for contractors to perform well, since having a claim made against poor performance would be something that affects a contractor’s reputation forever after and would hinder their potential for future hirings. A contractor in default of bond terms would also be legally obliged to reimburse the surety company which sold the bond, so there would be considerable financial damage as well as the reputational damage.
How to Get Bonded in Connecticut
The first step involved in securing a surety bond Connecticut is to make sure of the specific type of bond you need to purchase, and then find a surety company that can sell you that bond. To be guaranteed the fastest service and most affordable bond rates, contact us for all your Connecticut bond needs.
Once you’ve applied for the right bond, an agreement of indemnity will be drawn up specifying the bond amount as well as all the performance and compliance terms associated with the work project. That will be sent to you for your signature and for notarizing, after which you would return the document by fax or mail. At that time, the surety would be issued and you would have the desired coverage.
NFP provides affordable surety bond Connecticut and fidelity bond insurance. Each bond is prepared on a specific Connecticut bond form, as prescribed by the entity requiring the bonding (known as the obligee). Below is a list of commonly requested surety types in Connecticut.
Apply for your Connecticut surety now by completing our online application. If you have any questions about surety bonds in Connecticut, call our experienced team. Quotes are always free, and we’ll answer any questions you may have about bonds. If you prefer, you could download an application to complete and email it to our bond insurance agency for processing.
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