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Surety Bonds

Universal 1st

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 surety bond ensures contract completion in the event of contractor default. A project owner (called an obligee) seeks a contractor (called a principal) to fulfill a contract. The contractor obtains a surety bond from a surety company. If the contractor defaults, the surety company is obligated to find another contractor to complete the contract or compensate the project owner for the financial loss incurred.

Contractors can obtain surety bonds through Universal 1st. Most public construction contracts and many private contracts require one, so if you’re a construction or service contractor bidding on a project, you’ll probably need a surety bond.

Each surety company has different criteria for deciding which contractors it will bond. However, all sureties evaluate the contractor and the contractor’s work to determine whether the surety will bond that contractor. Since the surety guarantees the contractor’s performance, the surety needs to decide whether the contractor has the ability and resources to perform. Any guarantor has an interest in guaranteeing only a dependable product or service, and sureties are no different.

A surety’s means of evaluating a contractor to decide if it will issue bonds is the underwriting process. This process sometimes is described as evaluating the 4 C’s-Character, Continuity, Capital, and Capacity.