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All About Commercial Insurance 'Bonds', Their Types and Their Prices.
A bond is a legal contract that involves three parties: (1) The bonded party (the client seeking the bond), also called the Principal, (2) the obligee or the party that is requesting the bond from the client or the one who is the recipient of an obligation, and (3) the surety (insurance company), also called Obligor who assures the obligee that the principal can perform the task.
It is important to understand that the bond is not an insurance policy. Bond pays for damages due to not meeting conditions, lack of completion, a dishonest behavior, etc. Insurance pays for damages because of an accident.
A surety bond, for example, is a guarantee that the Principal in the bond, will perform the "obligations" as stated in the bond contract. For example, these obligations can be completing a project on a specific date, performing certain tasks according to village codes, etc. Once the Principal has met the conditions, the bond becomes "void". The language of the bond normally holds both the Principal and the Surety the responsibility to meet the terms of the bonds, jointly and severely - meaning that the Obligee could go after either party or both party in the event of not satisfying the terms of the bond.
There are hundreds types bonds. They include:
Auto Dealer Bonds: A bond required by many states for new ventures in the used car dealership.
Bid Bonds: Provide guarantees that certain individuals will sign the contracts when they are bidding and the bid is awarded to those people.
Broker Bonds: A bond covering a wide range of brokers, like insurance brokers, mortgage brokers, real estate brokers, etc.
Cigarette Tax Bonds: A bond required by the government from tobacco distributors, to make sure they will pay the taxes.
Completion Bonds: A guarantee that a project will be completed on or before a specific date, regardless.
Contractor License Bonds: Local and federal governments may request from certain contractors to have contractor bond, in order for the governmental body to grant license for the contractor to operate at a particular place.
Customs Bonds. Required by the federal government (US Customs) from importers.
DME Bonds: Bonds required by the federal government (Medicare) from the Distributor of Medical Equipments.
Fidelity Bonds: Guarantee the lack of harmful or dishonest acts of certain individuals (employees, for example.)
Freight Broker Bond (aka ICC Bond, or BMC-84) A bond that a federal government body (FMCSA) requires from all transportation/ freight brokers to operate - to guarantee delivery.
Fuel Tax Bonds: A bond to guarantee payment of truckers of fuel taxes sold in a particular area.
Jail Bonds: Guarantee that an individual will come back to jail/court on/ before a particular date.
License and Permit Bonds: A category of bonds, not a type. This category includes contractors bonds, auto dealers, brokers, and other types.
Liquor Tax Bonds: A bond to guarantee that the owner of a liquor establishment will pay liquor taxes to the government.
Lottery Bonds: A bond that the establishments with state lotto machine are required to have to guarantee payments of lotto money to the state.
Mortgage Banker/ Lender Bonds: Not the same as mortgage broker. This bond guarantees that the lending institution is going to stick to the state laws related to lending.
Payment Bonds: Guarantee certain payments are made by a specific date.
Payday Loan Bonds: Bonds that guarantees that payday lenders are operating per the state laws and rules.
Sales Tax Bonds: A Bond that guarantees the payment of sales tax to the government.
Title Agency Bonds: Required by many local governments to guarantee the title agents.
Utility Bonds: Used to guarantees the payment of the utility bills in timely manner.
Cost of bonds
The cost of the band depends on the amount of the bond, the credit of the Principal, and the type of the bond. For example a $10,000 contractor bond is less than a $50,000 similar bond. Some bonds require strict credit and financial underwriting. A $20,000 used car dealer bond could sell for less than $200 for someone with good credit, but may cost $1,500 (or even be not available) for someone with bad credit. Insurance companies also compete among each other, so a bond that costs $100 with a company may cost $50 with a different company.
Ed Sneineh: Founder of Insurance Navy, an independent insurance broker chain in Chicago. Insurance Navy is licensed in Illinois and Indiana for Contractors Insurance and Bonds. The agency provide coverage for Contractors Bonds Quotes.
Mortgage Broker Bonds - Highly Requested Types of Surety Bonds
In today's competitive and unstable economical climate, surety bonds play a crucial role, guaranteeing for the respecting of payments, the fulfilling of certain roles or other terms stipulated in legal agreements. Surety bonds can take a wide range of forms, serving for a multitude of purposes. While some bonds are closed for guaranteeing payments and various other financial transactions, others oblige the parts who sign the contract to perform a series of tasks or fulfill certain duties.
Although surety bonds are commonly undertaken and managed by insurance agents, it is very important to note that they differ from insurance. Surety bonds are basically legal documents that guarantee that an obligation will be properly fulfilled; otherwise, a certain penalty will be paid by the surety company. Once a person signs the agreement on the bond, that person is obliged to reimburse the surety company in case of a financial loss. Surety bonds are powerful financial tools undertaken through documents and forms that are often very different from those characteristic to insurance.
Surety bonds can be categorized in two main distinctive groups: contract surety bonds - provide financial security and construction assurance on construction projects by guaranteeing to the obligee that the principal will perform the work and pay certain subcontractors, workers and material suppliers (include performance bonds, bid bonds, payment bonds, maintenance bonds and subdivision bonds) and commercial surety bonds - guarantee performance by the principal of the obligation or undertaking described in the bond (include license and permit bonds, judicial and probate bonds, public official bonds and federal bonds). A very popular subtype of commercial surety bonds is represented by mortgage broker bonds. Due to the fact that mortgage broker bonds are imposed by state law, enabling brokers or lenders to sustain their activity in legality, these subtypes of commercial surety bonds have a great importance and are highly requested at present.
Despite the fact that many people consider that mortgage broker bonds and mortgage banker bonds are the same thing, these types of bonds are in fact two distinctive concepts. While mortgage banker bonds refer to license and permit bonds that are required for mortgage brokers who are also members of the institutions that finance the loan, mortgage broker bonds are designed exclusively for brokers, not for persons who are also lending the funds. Consequently, mortgage broker bonds are generally easier and quicker to obtain than mortgage banker bonds.
Mortgage broker bonds guarantee the authenticity and legality of brokers' license, as well as the respecting of the laws, rules and regulations imposed by a certain state and / or required by the mortgage broker licensure code. It is important to note that each state establishes a series of specific laws and thus each state has individual mortgage broker bonds. In addition, each state may regularly change the document list required for obtaining mortgage broker surety bonds, as well as the fees that need to be paid in order to close such bonds. Thus, it is advisable to do an elaborate research on the exact state requirements before closing mortgage broker bonds in a certain state.
The surety bond industry has suffered substantial changes over the last few years, determining considerable increases in surety bond rates. In addition, personal credit reports nowadays have a greater importance in obtaining better bond rates. For instance, a person with a great credit score is more likely to obtain lower rates than a person with a less impressive credit situation. However, even in the case of clients with good credit scores, most surety bond companies may decide to drop their policies if their clients' credit scores drop. The good news is that mortgage broker surety bonds are still affordable and not difficult to obtain.
Unlike most types of surety bonds, mortgage broker bonds haven't changed much in the last few years, at present having a low claim rate and benefiting clients with low premiums. However, in order to ensure that you will be provided with highly efficient and affordable mortgage broker bond services, you should only rely on the best bonding agencies in the industry. To obtain the best results, it is advisable to hire the services of an experienced, reliable and dedicated bonding agency with an impeccable reputation.
So, if you want to find out more about surety bond or even about mortgage broker bond, please visit these links.