Even the most skilled and experienced contractors can get confused by General Indemnity Agreements. As a contractor, it is no doubt that you will eventually deal with surety bonds and the process to obtain one or more in order to run your business. Part of the surety bond process included signing a general indemnity agreement (GIA). The GIA ensures that the surety will be reimbursed in full for any financial burden caused by issuing the surety bond to the respective principal.
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If you want to expand your business and be as successful as you can be, it’s necessary to learn the intricacies of the surety industry. It is especially necessary to always choose the best in the business to help you obtain the necessary surety bonds at an affordable rate- Bonding Solutions. With over 30 years of experience, we will help you grow your business and find the deal that suits all of your needs. Contact Bonding Solutions and get started with the process!
Quick Rundown Of The Surety Bond Industry and Indemnity Agreements
A surety bond is an agreement that is made between three parties – principal, obligee, and a surety.
- The principal is a person who seeks the surety bond (you).
- An obligee is a person who requires the bond as sort of a protection (party requiring a bond).
- The surety is an agency that is going to issue the bond (Bonding Solutions).
Simply put, a surety bond is a contractual guarantee you’ll be able to fulfill all of the necessary work that needs to be done.
If a claim has been made, you (the principal) need to fulfill the necessary obligation (pay back what has been claimed) to the surety. Sureties want to protect themselves so they require that a principal sign another contract called – indemnity agreement.
A general indemnity agreement (GIA) is an agreement between you and the surety bond company that guarantees that you will compensate the surety company in case an obligee makes a claim. In this case, the surety bond company is securing itself against the potential loss that can arise from them being liable. So let’s say that there is a claim for a certain amount of dollars and the surety bond company pays it. Because of the indemnity agreement, the principal has agreed to repay the surety the same amount.
Now that we’ve found out what surety bond and general indemnity agreement are, we can focus on some of the questions our clients have had in the past. Remember, a key to being good and successful in your field is knowing how to interpret various information and incorporate them into your business.
Who has to sign the indemnity agreement?
If you’re the sole owner of the company, just you and your spouse. If there are more people who have a percentage in the company, all of them plus their spouses have to sign the agreement. The number one reason is if a claim occurs, surety bond companies want someone to repay them the money they gave out for the claim.
Why would my spouse need to sign an indemnity agreement?
Even though your spouse doesn’t have anything to do with the business, she/he still has to sign. Reason is that married people probably share assets. It would be impossible for the surety bond company to collect the money back in case a principal transfers all of his possessions to the spouse’s account. We need the spouse’s signature just in case something like that occurs, which probably will not but we have to insure ourselves as well.
Do I sign the indemnity agreement before or after you guys issue my surety bond?
Before we issue your surety bond, we need your signature on the indemnity agreement. Indemnity agreement is our way of securing ourselves in case we need to pay the claim to the obligee.
Can you tell me what can happen if I don’t repay the surety company?
If the agreement isn’t fulfilled, we would probably take necessary legal action. When you try to acquire a surety bond, this agreement simply acts as a staple of the business deal. It’s a standard procedure in the surety bond industry and it acts as an insurance for the surety bond company. When you sign an indemnity agreement, you are automatically becoming liable for damages.
Do all bonds require me to sign this agreement?
Not all of them. It depends on the risk involved with the surety bond. Some bonds where the amount is minimal and the risk is low may not require you to sign an indemnity agreement.
Which bonds require me to sign this agreement?
We would require your signature on the indemnity agreement if the bond we’re going to issue to you is of higher amount or risk. If your bond request needs to be closely looked at and assessed by our underwriter, you will most likely be required to sign an indemnity agreement. Whenever we engage with underwriters, there’s a greater risk involved in the deal so naturally, we would need you to sign the agreement as an insurance on our end.
Why can’t I just use my license instead of acquiring a bond?
Simply put, the surety bond is a piece of paper that recognizes your ability to perform a certain job or task you’re required to do for the person who contracted you for the job. Your license recognizes you’re permitted to do this line of work but your surety bond is an insurance that your company will be able to do the job. If you fail and a claim has been made, it’s easier for the person who made a claim to get the funds back.
Indemnity agreements may be a tough nut to crack for some people but they’re easily understandable once you figure it’s a way for the surety company to be able to get the funds repaid after they paid the sum made in claim. Sureties help you grow your company and trust that you can do the contracted work but they also need an assurance that you’ll do the right thing if a claim has been made. Most, if not all, clients don’t find this troubling and sign because the surety company’s bond is their only way to get the work they desire and they applied for. Whatever you choose to do, you need to understand that the Bonding Solutions team is here to help you down this path. Our agency is the right agency for you and your business. Whatever you need, our trusted team will make it happen!
Bonding Solutions, Providing Surety Bond Solutions Nationwide
Bonding Solutions is a trusted partner in the industry. Our team of experts is always placing a focus on the clients needs. We’ll be able to find the right bond for your business. Choosing to do business with Bonding Solutions is a choice into a successful business future. Choose Bonding Solutions!
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