The world of business is fueled by contracts and legal agreements. Without these agreements, it would be difficult for businesses and their customers to give and receive services without protecting themselves against risks. Surety bonds are one of the most common legal documents that are used to protect consumers against damages that they can incur from negligent businesses.
Louisiana surety bonds are issued across many different industries to protect consumers against damages, and businesses against costly claims from their customers. There are many different types of bonds that are issued, and they guarantee a variety of products and services.
Because surety bonds have become so common in the commercial space, it is important to understand what they are and how they work. Louisiana surety bonds can become complicated to understand, depending on the specific purpose that they are issued for.
Understanding Louisiana Surety Bonds
In its simplest terms, a surety agreement is a contract between three parties. It is commonly used when a person/business is seeking a service from another entity. In such a case, the service recipient may need to be guaranteed that the service they are seeking from the service provider will be performed to the requirements stipulated in the contract. In the event that the service provider fails to fulfill the services agreed upon, the recipient of the service can seek to be compensated for any damages that they incurred.
The recipient of the service is referred to as the obligee, and the service provider is the principal. When an obligee enters into a contract with the principal for the provision of a particular service, the obligee may request a bond from the principal as an assurance that the service will be delivered as agreed upon. The principal will therefore obtain the bond from a third party- the surety. The surety is an insurance company that issues bonds to principals and pledges to honor claims that are made against the bond by an obligee.
In situations where an obligee makes a claim and is compensated by the surety, the surety will then seek to be paid back by the principal. The principal and the surety typically agree upon the terms of the bond (such as the value, premium and other costs) at the time when the principal applies for the bond. If you are ready to get bonded in Louisiana, contact our office today.
Sureties Are Both an Insurance Policy and an Extension of Credit
Louisiana surety bonds therefore act as part insurance to the obligee and part credit to the principal. This is because an obligee can enjoy a level of security when they enter into a contract with the principal. If the principal does not honor their end of the deal, the obligee can make a claim and be compensated by the surety for damages.
On the other hand, the principal enjoys an extension of credit from the surety. When the principal has to compensate an obligee for violation of a contract, they don’t have to incur costly out of pocket expenses. The surety can initially honor the claim, and the principal will compensate the surety at a later date. In most cases, the principal only has to compensate the surety for a fraction of the cost of the bond (typically 1%-15% of the bond’s face value).
At NFP, we have been leading the surety bond industry since 1984. Let us teach you how to get bonded in Louisiana. We can answer all your questions, and make sure you end up with the correct bond type.
Types of Louisiana Surety Bonds
With how useful surety bonds are, you can now see why they’re so popular in business transactions. A surety bond Louisiana is issued for many different industries. Some of the most common bonds include:
- Business service bonds: Louisiana companies that hire employees who will be working inside people’s homes are required to obtain business service bonds. The purpose of a bond is to protect the business against claims of negligence, damages or theft to the customer’s property.
With a business service bond, customers can have greater confidence in a company’s services because they can be covered in case the business causes damage to their property. The amount of the bond required depends on the number of employee hired by the business. The most common bond amount for business service bonds in Louisiana lies at around $50,000.
- Contract bonds: contracts bonds are regularly issued for public construction projects. They are meant to protect the owner of a construction project from the negligence or poor services of a contractor. For federal and state construction projects, contract bonds protect taxpayer dollars against wastage or losses as a result of negligent contractors. Public projects that exceed $100,000 in value always require the issuing of a contract bond.
- Motor vehicle dealer bonds: motor vehicle dealers who sell more than five new/used cars during the year are required to post a $50,000 surety bond. These bonds are issued to protect customers who enter a sale contract with the vehicle dealer. The dealer is expected to adhere to the contract requirements governing the sale, exchange or repair of vehicles that are sold. The dealer must also adhere to the provisions of Title 32 of the Louisiana Revised Statutes during their operations. Any violations can lead to a claim being made against the bond for damages incurred.
- Louisiana notary bonds: notary bonds are regularly issued in Louisiana for certified notaries. They are meant to ensure that notaries, who administer oaths and oversee the signing of legal documents, do so with strict adherence to Louisiana revised statutes. The $10,000 surety bond can have a claim made against it when customers suffer damages from a fraudulent or negligent notary
Obtaining a Louisiana Surety Bond
Obtaining a surety bond in Louisiana is much easier than it once was. Surety companies are more willing to extend bonds to qualified entities at competitive rates. You can now apply for a bond on our website or by calling us. We have a clean and simple online application that can be processed in a matter of minutes and decisions can be made in a short amount of time. Call us today at 800.863.3210 to get started.
When applying for a bond, you often need to specify your expertise or your business, the type of bond you need and your financial history. This information will be used to determine if you qualify for the bond and the amount of premiums that you will need to pay. Credit checks are also regularly carried out to further determine the best rates for you. Our team is here to help. Let us use our experience to teach you how to get bonded in Louisiana today.