All About Commercial Insurance ‘Bonds’, Their Types and Their Prices.
Posted by in Bond Insurance on September 16, 2011
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.
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Boat Insurance Comparison
Posted by in Boat Insurance on September 16, 2011
If you own a boat then you should know that boats come with a variety of marine related risks. That is why boat insurance is a bit more complex than regular auto or home insurance. In order to be able to do a proper boat insurance comparison you need to take into account all the marine related risks and certain things like the navigation limits, towing and liabilities.
The first thing one needs to do before they can properly do a boat insurance comparison is to evaluate their needs. First of all you need to clearly establish what type of boat you own. Is your boat meant for comfort or is it a speed boat? You also need to specify where you usually want to sail your boat, whether it’s in coastal waters or in inland lakes, or international waters. Establishing all these things is very important as this will influence the type of coverage you will require. Other things that you need to establish include the value of your watercraft, the length and the type of boat hull. All this things are also important in order to establish the insurance quotes.
In order to get a good boat insurance comparison you need to know what the features of the insurance policies are. You need to know whether the insurance policy provides road side assistance. It is important that your policy provides such a feature as in case your watercraft is damaged due to certain reasons like accidents or mechanical breakdown, the towing to a repair facility and the coverage for the repairing labor will be taken care of by the insurance company. A good boating insurance should also include a collision and a comprehensive coverage. The collision coverage will be needed if your watercraft collides with another boat or an object. Coverage in case of fire, vandalism or theft will be provided by the comprehensive feature.
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Surety Bond Cost
Posted by in Bond Insurance on August 5, 2011
If you are looking for an estimate of surety bond cost, then this article offers some help in that matter. Read to get an idea about how much you can expect the surety bond costs to be in the current market conditions.
Surety bonds are important financial instruments, that act as a kind of insurance or financial guarantee. A surety bond is a facility that protects businesses from losses incurred through defaulted contracts. It is one way of dealing with risks in performing contractual obligations. This article provides information about what one can expect the surety bond cost to be and what are the factors that affect it.
What is a Surety Bond?
Before I provide an estimate of surety bond costs, let me briefly explain what is a surety bond. A surety bond is a three way, financial agreement that holds between the ‘Principal’, the ‘Surety’ and the ‘Obligee’ for purpose of guaranteeing the execution of a contract job. The ‘Principal’ is the person or organization that is performing a contractual obligation, the ‘Obligee’ is the organization on the receiving end of the obligation and ‘Surety’ is a third party financial institution that assures the principal will perform the assigned task. In event of the principal not meeting obligations of the contract in a fixed period of time, the obligee can recover all losses using the surety bond. The amount of compensation paid to the obligee by surety, in case the principal does not meet the obligation, is called ‘Penal Sum’. This sum is later recovered by the surety from the principal.
In return for the service of issuing the surety bond, the surety or financial institution is paid a premium by the principal, whose value is determined by the penal sum that may have to be paid. In Europe, surety bonds, issued by banks are called ‘Bank Guarantees’.
Surety bond is a generic term used for many types of bonds. The many types of bonds that act as surety bonds include the contract bond (which includes bid bond, performance bond, maintenance bond and payment bond used mainly in the construction industry), permit bond (required by government laws), commercial bond (that lend credibility to businesses) and a bail bond (used to secure release of an offender till trial). Depending on the type of obligation made mandatory and nature of contract, there are many other types of surety bonds. Surety bond insurance is a widely used financial tool in USA.
Factors Affecting Surety Bond Cost
The surety bond rates are determined by many factors associated with the nature of the contractual obligation. The surety or the financial institution that offers credibility for a contract to an applicant, considers the degree of risk involved when calculating the surety bond cost that it recovers in the form of a yearly premium. The financial record of the applicant or principal is studied and the odds against the successful completion of a contract are calculated accordingly. Higher the risk involved, higher are the surety bond rates of interest.
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