When you put up a surety bond, there is always a risk that it will be forfeited. This can happen for several reasons, such as if the person or company you are bonding with fails to meet their obligations. When this happens, it’s important to know who is responsible for paying out the bond. In this blog post, we will explore who pays if a surety bond is forfeited.
What is a surety bond?
A surety bond is a contractual agreement between three parties: the obligee, the principal, and the surety. The obligee is the party who is protected by the bond and can be an individual or organization. The principal is the party who provides the bond, and the surety is a third-party guarantor that ensures that the principal will fulfill its obligations to the obligee.
Who pays if a surety bond is forfeited?
If a surety bond is forfeited, the principal (the person or company who purchased the bond) is responsible for paying the full amount of the bond to the obligee (the person or entity to whom the bond was issued). The principal may also be responsible for any damages incurred by the obligee as a result of the bonded party’s failure to perform.
Why surety bond gets forfeited?
There are several reasons why a surety bond may be forfeited, including:
-The principal fails to perform the obligations stated in the bond agreement
-The principal is unable to provide adequate financial compensation to the surety company
-The principal violates the terms of the agreement in some way
-The surety company is unable to meet its financial obligations
Who is to blame if a surety bond got forfeited?
The quick answer is that the Principal is to blame. The Principal is the party who purchased the bond and they are responsible for making sure the obligations of the bond are fulfilled. If they fail to do so, then the surety company who issued the bond will be forced to pay out on the claim and will look to recoup that money from the Principal.
How to avoid a surety bond not getting forfeited?
Let’s look at some tips to avoid having your bond forfeited:
– Clearly define the scope of work and responsibilities in the contract between you and the principal. This will help avoid any misunderstandings later on.
– Make sure you are working with a reputable and financially sound surety company.
– Monitor the work of the principal closely to ensure they are meeting their obligations.
By following these tips, you can help avoid your bond being forfeited.
Can I get sued if the surety bond got forfeited?
The short answer is no, you cannot be sued if the surety bond gets forfeited. However, there are some exceptions to this rule. For example, if you falsified information on your bond application or if you deliberately failed to comply with the terms of your bond, you could be held liable for damages.
Can you claim if the surety bond got forfeited?
The answer is, unfortunately, no. You cannot claim the money if the surety bond gets forfeited. The reason for this is that the surety company is taking on all the risk when they issue the bond. They are essentially guaranteeing that the full amount of the bond will be paid out if needed.
Can I renew a forfeited surety bond?
The answer is maybe. If the reason for the forfeiture was non-payment of premium, then the surety company may be willing to renew the bond if you pay all past due premiums plus a reinstatement fee. However, if the forfeiture was for claims paid or some other type of loss, then the surety company is unlikely to renew the bond.
If you are unable to renew your forfeited surety bond, you will need to obtain a new bond from a different surety company. The process for obtaining a new bond is generally the same as the original bonding process. You will need to complete a new application and pay any required fees. The premium for the new bond may be higher than the original bond, due to the increased risk.