Ohio Contract Surety Bonds

A surety bond is essentially a three-party contract. . One party, in this case, the surety, promises, according to the terms of the bond, to pony up the dough for the other party who might screw up. We call that second party, the principal. The third party, the obligee, is protected by the bond.

Normally, the surety and the principal will guarantee to do what they agreed to do or pay the obligee up to a set amount of cash for damages if the principal fails to perform what he said he was going to do in the contract.

A fourth party, the surety “bonding agent,” is not actually “part” of the bond, but can be utilized as a resource to the other folks involved. in the surety bonding process and may play a role sometimes in a claims situation.

When a prime contractor produces bonds, the person responsible for the project will be the obligee and the prime contractor will be the principal. When the prime contractor needs his subcontractors to produce bonds, the subcontractor ends up being the principal and the prime contractor becomes the obligee.

For this discussion, the surety we’re talking about is Kernan Insurance. However a surety bond is not a typical insurance policy. A surety bond provides financial assurance of its principal’s performance. A surety bond does not “assume” the primary obligation, but is secondarily liable. The principal remains primarily liable for making sure the contract and obligations are performed.

The principal must reimburse the surety for any loss that the surety may incur based on the surety having extended surety based credit that would back the principal’s performance. The obligee is then protected by the bond against financial loss as a result of the principal’s default. A surety bond does not, however, guarantee that major disagreements will not happen between the obligee and the principal.

For the sake of this arguement, Ohio Surety bonds essentially guarantee that the bond principal will do what is stated in the contract or pay what it owes.

At the Kernan Insurance Agency, we feel that full transparency is the key to any worthwhile relationship. Contact a Kernan Insurance Agent today for more information On Contract surety bondsy for your company!