Surety Bonds  from Massachusetts Specialists

Roger Keith & Sons

What are surety bonds?

When customers make a major purchase or sign a major contract, they sometimes want a guarantee that the other party will uphold their obligations. Surety bonds are one way that Massachusetts businesses may provide such a guarantee.

Surety bonds function as a form of assurance between parties. Should a business fail to meet its obligations, a bond might give the customer appropriate compensation.

When do Massachusetts businesses need to get surety bond insurance?

Surety bond insurance is mostly used for major purchases or contracts. Auto dealers, construction companies, and fiduciaries in Massachusetts may be required by state law or a customer to get a bond.

What kinds of bonds are purchased by auto dealers?

Auto dealers are generally required to purchase an auto dealer bond. Massachusetts state law normally requires that they have at least a $25,000 bond before obtaining an auto dealer license.

The purpose of an auto dealer bond is primarily to protect customers from fraud. A bond might compensate customers if their vehicle purchase proves to be fraudulent. Spending so much on a fraudulent transaction could otherwise be financially devastating.

What kinds of bonds are purchased by construction companies?

As they go through the process of bidding for and completing a project, construction companies might need a few different types of bonds:

• Bid Bond: May ensure that a contractor honors their construction bid, moving forward with the project if chosen.
• Performance Bond: May ensure that a contractor completes the project according to the contract’s terms and specifications.
• Payment Bond: May ensure that a contractor pays all necessary wages to their employees and subcontractors.
• Maintenance Bond: May ensure that a contractor addresses and corrects any defects found in their work post-completion.

An insurance agent specializing in construction bonds can help companies navigate the process of getting these various bonds as a project proceeds.

What kinds of bonds are purchased by fiduciaries?

Fiduciaries may need a bond in case they accidentally fail to act in a client’s best interest. The type of surety bond that a fiduciary purchases depends on their specific role:

• Executor Bond: Usually for fiduciaries who manage the estate of a deceased individual who had a will.
• Administrator Bond: Usually for fiduciaries who manage the assets of a deceased individual who didn’t have a will.
• Guardianship Bond: Usually for fiduciaries who manage the assets of a minor, or of an adult with a significant disability.
• Conservatorship Bond: Usually for fiduciaries who manage the estate of a ward.

An insurance agent who understands fiduciary bonds well can help with selecting the right type of bond for a given role.

What’s a surety, obligor, and obligee?

There are generally three parties to a surety bond:

• Surety: Typically an insurance company that provides the financial assurance.
• Obligor: Typically the business or individual who needs to meet obligations.
• Obligee: Typically the customer, who may be compensated if the obligor fails.

How much does getting surety bond insurance cost?

The cost of surety bond insurance varies based on the bond type, bond amount, and obligor’s history and qualifications, and other details. The cost is usually a fraction of the bond amount that’s needed, though.

An independent insurance agent can help obligors explore what surety bond options are available to them. Although these are technically different than insurance policies, they’re still regularly underwritten by insurance companies. An independent agent will be able to check the options offered by different insurers.

Where can businesses and individuals find surety bonds?

If you’re in Massachusetts and need a surety bond, contact the independent insurance agents of Roger Keith & Sons. Our agents are well-versed in surety bonds, and will make sure you find one that provides the guarantee you need to give customers.