Bonds have become an essential part of a business, with their usage spanning across multiple industries. Washington surety bonds are regularly required by businesses so they can offer a guarantee for their products and services. There are many different types of bonds available, used to offer assurance to contracts that are signed between the involved parties. In fact, most businesses that are licensed by the state are required to be bonded.
Washington surety bonds are most commonly issued in the licensing and permit professions, contractors when completing construction projects, and court bonds to ensure fulfillment of required court procedures.
With the significance that sureties have in many different industries, it is important to understand what they are and how they work. Indeed, Washington surety bonds can be complicated to understand, especially if you’re not familiar with them.
What Are Bonds?
A surety is a contract that involves three parties. It is commonly issued when a person/business is providing a service to another entity. The entity that is receiving the service may want to have an assurance that the service provider will fulfill the terms of the contract as agreed upon. If the service provider fails to fulfill the required services, then the recipient of the service can seek compensation for damages by making a claim on the bond.
In bond language, the provider of the service is referred to as the principal, and the recipient of the service is the obligee. When an obligee requests a bond from the principal, the principal often acquires it from an insurance or bond company (referred to as the surety). A principal will, therefore, apply for a bond from the surety, and the two parties will agree on the specific terms based on the nature of the services provided by a principal.
In the event that the involved principal does not adequately fulfill the terms of the contract that they signed with the obligee, the obligee can make a claim against the bond for damages incurred. The surety will be the party responsible for compensating the obligee, after which the surety will seek to be repaid by the involved principal.
Bonds Are an Extension of Credit and an Insurance Policy
With this understanding of how bonds work, you can see that surety bonds Washington serve two main purposes. First, they’re an insurance policy to the obligee for the services that they required in the contract. In the event that the principal defaults in offering the required services, causes damage to the obligee’s property, or violates any other parts of the contract, the obligee can seek compensation from the bond that was issued. Obligees can, therefore, enjoy a piece of mind when engaging with a bonded service provider.
Secondly, Washington bonds act as an extension of credit to principals. Principal can cover themselves against any immediate out-of-pocket expenses when they’re bonded. This is because the surety will honor any claims made by the obligee, and seek to be compensated at a later time. This extension of credit to the involved principal allows them to have continuity in their business operations, and a layer of security against costly damages.
Types of Washington Bonds
Having understood what sureties are and how they work, we can now see how they’re applied in the real world. Washington surety bonds exist in many different forms and for many different purposes. Some of the most common types of surety bonds Washington include:
- License and permit bonds – License bonds are also commonly referred to as commercial bonds. Their primary purpose is to protect the public against the services offered by personnel that are licensed by the state. For example, a painting contractor that you hire to paint your commercial property is often required by the state to be bonded. The purpose of the bond is to protect you in case the contractor does not meet the expectation of the contract, does not pay subcontractors, or causes damage to your property during the project. You will, therefore, find that most licensed electricians, motor vehicle dealers, painters and other licensed contractors are bonded. Call our office today, if you are ready to get bonded in Washington. We can cover all kinds of bonds, and poor credit is no problem for us. We’ll take care of you!
- Contract bonds – Contract bonds are mainly required for public construction projects. In order to protect the interests of the public and taxpayer dollars, federal and state governments often require contractors to be bonded for public projects that exceed $100,000 in value. Should the contractor not meet the stipulations in the contract, the federal/state government can seek compensation from the surety.
- Court bonds – Court bonds are a common type of Washington surety bonds. They are assurances required by the court of individuals who need to appeal a court decision, desire to become legal guardians of minors or disabled persons, or who seek to operate as fiduciaries of an estate. The primary purpose of the court bond is to protect the interested parties or the court itself against any defaulting actions carried out by the litigant.
- Fidelity bonds – Sometimes employees act dishonestly, causing clients harm. Fidelity bonds allow an obligee to be compensated for theft and damage to their property as a result of the actions of an employee.
How to Get a Surety Bond in Washington State
With bonds becoming a regular requirement in many different industries, the process of acquiring a bond has been made quick, simple and efficient. The use of technology has made it possible to apply for a bond online and receive a decision in minutes.
When a person or business needs to get bonded in Washington, they can visit a surety company’s offices or website and fill out an application. The application will ask for your profession, the type of bond you need, information to carry out a credit check and references for your business.
The bond provider will then assess this information according to their established guidelines and recommend a bond type, bond amount and premiums that suits your situation. Most surety bonds Washington cost between 1%-15% of the total bond amount.
Working closely with a bond provider can enable you to get the best rates for your bond type, and a monthly premium that is manageable for your business. All this can be achieved while satisfying the requirements of most of your customers.
Our Washington State bond program was created to assist our clients get properly bonded. NFP is a major provider of Washington bonds and fidelity bonding. Every Washington bond is prepared on a specific form, as prescribed by the WA entity requiring the bond. Below is a list of surety types that are commonly required in the State of Washington.
Apply for your bond, and we’ll gladly educate you on Washington State surety bond requirements. Get bonded now by completing our online application. If you prefer, you may PDF download an application to complete and fax or email to our agency for processing. Quotes are free. Let us show you how to get bonded in Washington today!