The purpose of a financial guarantee bond is to ensure that the obligation of the bonded party to another party is paid in full. This type of bond protects all parties in the event of a default, an act of nature, or some act of negligence. Many people are unfamiliar with this type of bond and how it works. Here are three questions along with some answers that will explain the purpose and function of this type of bond.
Is There Only One Kind of Bond?
In fact, financial guarantee bond is a collective term that encompasses a wide range of bonds. Many of them have to do with use in specific types of situations. Some may have to do with mortgages while others have to do with collection agencies, contracted work, or even bonding an insurance broker. In all forms, the bond is designed to ensure that neither party sustains a loss from any event covered within the bond’s terms and conditions.
Are These Types of Bonds Expensive?
The cost does depending on the scope of coverage that you want. In general, the out of pocket expense to you could vary anywhere between 1% and 10% of the bond’s face value. Along with the bond amount, the type of bond will impact the amount that you pay.
Is It Possible to Secure a Bond If I Have Poor Credit?
It is possible to secure a financial guarantee bond even if your credit is not the best. By talking with an agent who issues these types of bonds, you can get an idea of what impact your credit score has on the process and how much you will need to pay up front.
Remember that the bonds are intended to protect all parties involved. View it as a great way to generate more confidence with your customer or partner, even as it protects you from unforeseen circumstances that would otherwise create financial harm.
Call JR Olsen Bonds & Insurance, Inc. or visit us at Website to learn about the bonds, liability coverage, and other forms of insurance that we offer to our clients.
