Sureties have become an important part of many businesses. Their use spans many different industries and purposes. Sureties provide protection to customers against negligence or damages caused by contractors, and they also extend credit to contractors for claims made by their customers when a contract is violated.
Sureties, therefore, offer a guarantee to the services of a service provider. Customers can enjoy greater confidence in the services that they procure when the service provider is bonded.
Surety bond South Carolina can, and are used to guarantee many different services, from residential to contract bonds that cover public construction projects. It is important to understand more about what sureties are, how they work and how they can be obtained for business use.
We are the industry leader in bonding solutions. There is nothing we can’t cover. We even have bad credit programs to help you get bonded in South Carolina. Contact our office today, or fill out the online application. It only takes a minute!
What Are Bonds?
You can think of bonds as a legal agreement between three separate parties. They are commonly used when a person or business seeks a service from another entity. As service recipients, the person/business would want to make sure that services they are procuring will actually be delivered according to the contract.
Should the provider of services fail to fulfill the contract, the services receiver can be compensated for damages incurred. In order to obtain adequate compensation, the service recipient will request a bond from the service provider for a particular amount. The service recipient can then make a claim against a bond should they need to seek compensation.
In bond language, the service recipient is referred to as the obligee, and the service receiver provider is the principal. When an obligee seeks bonding from the principal as a guarantee for their services, the principal will obtain one from a third party, called the surety. The surety is an insurance company that offers a bond to its principal in return for monthly premiums.
In the event that an obligee makes a claim against the bond, the surety will compensate the obligee and later seek payment from the associated principal. Therefore, the associated principal and the surety will agree on the bond amount, method of payment and the cost of a bond.
Sureties Play Two Important Roles
South Carolina bonds serve two important roles. First, they are an insurance policy to the associated obligee. When a principal enters a contract with the obligee and fails to fulfill the terms of the contract, the obligee can make a claim on the bond for adequate compensation. A classic example is during a construction project. If a contractor fails to complete the project to the standards that were agreed upon or fails to pay subcontractors, the obligee can protect themselves from resulting damages by making a claim against the bond, getting money from the surety company to cover the losses.
Secondly, SC bonding solutions are an extension of credit to a principal. When an obligee makes a claim, the principal is protected from hefty out of pocket expenses because the surety will handle the compensation of the involved obligee. This means that the principal will have more time to prepare themselves to pay back the surety. In fact, most bonds provided by surety companies to principals are offered at only a fraction of the face value of a bond (1-15% of face value in most cases).
South Carolina Bonding in Action
There are many different types of bonds issued in the great state of SC. Their basic purpose remains the same: extending credit to the principal and providing protection to the obligee. Call us today to learn more about getting bonded in South Carolina.
What are the most common sureties in South Carolina?
- Residential builder bonds – residential builder bonds are required of contractors who work on residential projects that exceed $5,000 in value. The bond is issued to protect the owner of the property from any damages incurred as a result of negligence on the part of the contractor. The bond also ensures that residential builders comply with state laws that govern the residential code in South Carolina. Should the associated principal fail to honor their obligations, a claim can be made against the bond for the value of damages incurred.
- Insurance broker – insurance brokers in South Carolina are required to post a $10,000 surety bond for their services. This ensures that the broker is held responsible for any code violations surrounding insurance laws and regulations. Bonds also covers any fraudulent insurance transactions that may be carried out by a broker. In addition, recipients of fraudulent insurance policies can make a claim on the bonded insurance broker if/when they suffer damages.
- Contract – one of the most commonly issued bonds, contract bonds cover public construction projects that are carried out by the state or federal government. A bond is meant to protect taxpayer dollars against the actions of negligent contractors. Most contractors who are carrying out public projects valued at over $100,000 must be bonded.
- Pawnbroker – pawnbrokers in South Carolina are required to issue a $15,000 bond for their services. They ensure that they comply with the South Carolina Pawnbroker act, which governs most of their services. Any violations of the code can enable consumers or the state to seek compensation for damages.
Obtaining a SC Surety Bond
Sureties have become an essential part of a business. Some industries prefer them, and many industries now require them. To obtain a surety for yourself or your business, you need to apply for it from a surety company. The bond application process has been made simple due to advancements in technology. Most surety companies now accept online applications and can render a decision in a matter of minutes.
When applying for a surety, you need to provide information about yourself and your business, specify the type of bond that you need and provide financial background information. The surety will use this information to determine your eligibility for a bond, as well as the premiums that you will be required to pay. Your financial history and credit score can affect the rate that you will receive for your bond.
To get a competitive bond cost as well as lower monthly premiums, work closely with a surety company to identify your specific needs.
Our team provides affordable bonding and fidelity insurance solutions. Every SC surety bond is prepared on a specific SC bond form, as prescribed by the entity requiring the bonding. Contact us to learn how to get properly bonded in South Carolina.