In Florida, a surety bond is required for most contractors to begin working on a project.Surety bonds protect project owners if a contractor does not complete their project according to the terms of their contract.By securing a surety bond, a contractor is able to bid on projects and the project owner is reassured that they will have financial protection. If there is any issue with the project or if the contractor is unable to fulfil their obligations, the surety company will compensate the project owner for its losses. The contractor is then required to pay the surety company for its loss.
Purpose of a surety bond
A surety bond is an agreement between three parties: the surety company (the guarantor), the contractor (the principal), and the project owner (the obligee). A surety bond serves as a guarantee for the obligee that if the principal does not meet the expectations outlined in the contract, then the guarantor will reimburse the obligee in full. Surety bonds:
- Protects the obligee from any default from the principal
- Establishes expectations for the principal and obligee
Are required for contractors to be hired for projects