Surety Bonds Made Simple:

Your Guide to
Financial Security

Strengthen your business relationships with the reliability of surety bonds

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What Is a Surety? 

A surety bond is a contract between three parties: the surety, the principal, and the obligee. It is used as promise that an insurer will fulfill the financial obligation of the project owner/principal, arising from the contractor’s/obligee’s non-performance or breach of the agreed contractual obligation. The organization making this promise is called the surety or guarantor.  

What Is a Surety? 

Who can buy Surety Bond?  

Though surety bonds are issued for various purposes globally. In India, Any contractor / business owner who qualifies and can execute a contract / project / supply of machinery but is required to provide security to the Beneficiary / Project owners at the time of bidding, performance, or the payment stage of the contract, can obtain this bond.  

Who can buy Surety Bond?  

Key Benefits

Financial Protection

Surety bonds guarantee that the contracted work will be completed as per the terms of the agreement.

Assurance of Quality and Completion

Surety bonds provide assurance that projects will be completed according to specified terms and quality standards

Legal Compliance

Certain industries and government entities require contractors to obtain surety bonds as part of their licensing or regulatory compliance.

Risk Management

They play a crucial role in risk management by enhancing the credibility of contractors and demonstrating their financial stability.

Financial Guarantees for Subcontractors and Suppliers

Surety bond, specifically guarantee that subcontractors and suppliers will be paid for their services and materials. This ensures that everyone involved in the project is compensated, maintaining trust and smooth project progression. 

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Questions You Might Have

What is Surety Bond? 

Surety Bond is a risk transfer mechanism wherein an Insurer/ Surety provides a guarantee to a Beneficiary that the Contractor will meet his contractual obligations. In case the Contractor fails to deliver his promise, a monetary compensation is paid to the Beneficiary by the Insurer.

What are the major exclusions in Surety Bond? 

  • Contract termination between Contractor & beneficiary prior to insurance
  • Changing terms of contract without the knowledge of the Surety insurer
  • Gross Negligence, illegal /criminal acts by both Contractor & beneficiary
  • War/Act of God/Force-majeure/Nuclear Perils
  • Fraud/Collusion
  • Any third-party loss not part of the contract
  • Any price fluctuation in execution of the project
  • Who can buy Surety Bond ? 

    A contractor who has been awarded with a contract to execute a project / supply machinery and required to provide security to the Beneficiary / project owners at bidding and performance stages of contract, can obtain this policy.

    How is bank guarantee different from Shorty bonds

    Bank guarantees require collateral and cover repayment failures, issued by banks with payments through them. Surety bonds, needing no collateral, protect against broken contracts, issued by banks, governments, or companies, with direct transactions unless there’s a default

    what is the fees of a surety bond?  

    The quoted premium for surety bonds primarily depends on the principal's credit score. However, it also considers several factors such as the rating, tender type, bond type, and duration. While insurers require documentation and additional information, these elements play a crucial role in determining the final premium rate.