Principal definition insurance
The SBA can guarantee some types of contract surety bonds. If the contractor falls through, the surety company must secure another contractor to complete the project or reimburse the project owner for any financial loss.
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The surety bond definition encompasses several types of surety bonds used for different situations. If the principal fails to meet contractual obligations, the SBA will reimburse the surety for some of its losses (up to 90%) on contracts up to $10 million. Role of the Small Business Administration (SBA): The SBA Surety Bond Guarantee Program guarantees several types of contract bonds for a fee of 0.60% of the contract value. If these assets are insufficient or uncollectable, the surety pays its own money to satisfy the claim. The surety bond requires the principal to sign an indemnity agreement that pledges company and personal assets to reimburse the surety if a claim occurs. To obtain a surety bond, the principal pays a premium to the surety, typically an insurance company. Surety bonds help principals, typically small contractors, compete for contracts by reassuring customers that they will receive the product or service promised.
#Principal definition insurance professional#
Obligees are frequently government agencies, but commercial and professional parties can also use surety bonds. The surety: The issuer of the surety bond guaranteeing that the principal will meet its obligation.Īt its simplest, a surety bond requires the surety to pay a set amount of money to the obligee if a principal fails to perform a contractual obligation.The obligee: The person who needs a guarantee that the principal will perform.The principal: The person who must make good on an obligation.You should contact the insurance company or insurance agent directly for applicable quotes. Any rates listed are for illustrative purposes only. This content is not, and should not be considered to be, a recommendation to life insurance products generally or an endorsement of a particular insurer or product. For more information about any of the companies or products profiled herein, or to inquire about the purchase of insurance, please contact the insurance company, an insurance agent, or a financial advisor. Some coverages, discounts, and features may not be available in all states. News nor the individual writers of this content are licensed to sell or advise on insurance products. News) prepared this content about insurance companies for general informational purposes only. When you use our links to buy products, we may earn a commission but that in no way affects our editorial independence. News 360 Reviews takes an unbiased approach to our recommendations. In addition, we maintain a separate business team that has no influence over our methodology or recommendations. All sample products provided for review are donated after review.
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