Surety bonds issued in the state of Kansas come in many different types, but they all serve a similar purpose in that they provide some measure of protection for an individual or company against poor work performance, or failure to live up to the terms of an agreement. In that sense, surety bonds have been likened to insurance, since the point of bonding is to protect against some negative event, and if that event should then occur, compensation can be obtained by the party suffering the injury. The difference between insurance and bonding, as will be explained below, is in which parties receive protection and which parties are required to pay compensation.
A surety bond is kind of contract agreement made between three parties: an obligee, a principal and a surety company. The surety company is a financial organization that issues the bond and has responsibility for paying out any claims made against the bond. Similar to how an insurance company operates, the surety is obligated to reimburse an obligee for some amount equal to or less than the dollar value of the bond when a claim is made against that bond. However, there’s a big difference between a surety company and an insurance firm: the surety has an opportunity to seek reimbursement from the principal in the agreement who defaulted the terms of the bond.
The principal in this arrangement is usually a contractor or a professional person who delivers services or some kind of finished product to the obligee, and it’s this principal who actually purchases the surety bond. The obligee in this tri-party arrangement requires the principal to purchase a surety bond as a measure of protection against poor workmanship, non-compliance with rules and regulations, or specific terms stated in the bond agreement.
How Do Sureties Work?
As mentioned above, surety bond works in a manner similar to an insurance policy, because there is financial protection against some kind of undesirable event, which in the case of a bond is poor performance or non-compliance. One example of how a surety works might be when a municipal government agency hires a plumbing contractor to install all the piping and fixtures necessary in a new office building. The government agency would routinely require bonding of the contractor bidding on the job, and the amount of the bond would normally approximate the dollar value of the work to be performed.
If the work estimate was $20,000, the bond might also be in the amount of $20,000, so that if the job were to be completely unsatisfactory, the government agency could be compensated for any damages done, and could then have rework done by another contractor. In this example, the municipal agency would make a claim against the bond, and that amount would be paid out by the surety company. The surety would then seek to be reimbursed by the principal who defaulted on terms of the bonding agreement, and provided unsatisfactory work. The whole point of bonding is to try and ensure that a hiring company is protected against malpractice or fraud by a contractor. Call us today if you have any further questions about how to get bonded in Kansas. We appreciate the opportunity to educate the public about bonds.
Common Surety Bond Types in Kansas
The most common types of surety bonds fall into two major categories, construction or contract surety bonds, and commercial bonds. Within the broad category of construction bonds, there are several sub-types that include bid bonds, performance bonds, supplier payment bonds, and site improvement bonds. Virtually every type of bond which does not fall into the category of a construction bond is included under the heading of commercial surety bonds.
One of the most common types of commercial surety bonds is the license and permit bond, which many states, including Kansas, require of contractors as a condition of doing business within state borders. The other major categories of commercial bonds are court bonds, public official bonds, fiduciary bonds, and fidelity bonds.
Industries that Require Kansas Surety Bonds
There are probably more surety bonds issued for the construction industry than any other single market in this country. This should not be surprising, since construction projects require the services of many different contractors, all providing services for a single project manager. The only way this kind of arrangement can work is if all those contractors can be relied upon for competent, professional service – any other possibility would result in project delays, rampant rework, and possibly even abandoned work.
With all contractors being bonded on a major construction project, there is at least some assurance of high-quality workmanship and professionalism. Government agencies are also huge consumers of surety bonds, since they have an obligation to ensure that contract work is done in a timely and professional manner, so taxpayers’ money is not misspent or wasted. Apart from these two major consumers of surety bonds, virtually every industry in this country makes use of bonding as well, although not to the extent of the two major players already mentioned.
Get Bonded in Kansas
Any kind of bond needed in the state of Kansas can be obtained from NFP, one of the most respected and trusted surety bond companies in the country. To begin the process of obtaining a bond, it must first be known exactly which type of bond to apply for, and the obligee party can generally specify this. Applying online is the fastest way to obtain a bond, and once an application has been filled out and submitted, the surety company receiving it would either approve or decline the application. Regardless of your credit status, we feel confident that we’ll be able to get you a surety bond Kansas.
Assuming an application is approved, the bonding company would issue an indemnity agreement specifying the terms of a bond, as well as the dollar amount, which represents the claim potential of the bond. This indemnity agreement would be sent back to the principal applying for the bond, and would have to be signed and notarized before its return to the surety. Upon receipt of the signed and notarized indemnity agreement, the bonding company would be able to issue the actual bond to the principal.
Our team provides affordable Kansas surety bonds and fidelity bond insurance. Every Kansas surety bond is prepared on a specific Kansas bond form, as prescribed by the entity requiring the bonding (known as the obligee). Apply for your Kansas surety bond now by completing our online application. If you prefer, you may download a PDF application to complete and fax or email to our bond agency for processing.