A
surety bond is a contract which is signed among three parties namely; the
principal, the surety and the obligee, which actually requires the bond. The
surety or the guarantor generally guarantees to the third party that the
contract will be followed according to the rules and regulations. It makes sure
that the principal does not get deviated from the terms and conditions of the
contract. The surety bonds of Georgia keep strict
control over this.
What is the procedure of the surety
bonds?
There
are many kinds of bonds in a country and one needs
to choose the right one among them by understanding the right set of rules and
regulations. The three parties which participate in the surety bond are as
follows:
·
Principal:
The principal refers to that party which generally buys the bond so that it can
guarantee future payments.
·
Obligee:
This is the second party which actually is in the need of the surety bonds
of Georgia. These are
mostly government agencies which function
for the proper functioning of the industries and restrict the financial as much
as possible.
·
Surety:
Finally comes the surety, which is the third party which has the duty to make
sure that the principal pays off the
amount to the obligee.
The
obligee has the authority to ask the principal to repay the money if he fails
to do so at the fixed time period. After proper scrutiny, if it is found that
the claim which is made is valid then the insurance company will surely pay the
reparation amount.
The
working of a surety bond can be best explained with the example of a
contractor. If the contractor initially fulfills
the terms and conditions, he will not any problems further and it is entirely a
smooth procedure. The bind will slowly expire and the contractor would not get
back the money which he paid initially.
On
the hand, if the contractor by any chance
fails to fulfill the terms and condition
of surety bonds in Georgia, then, a claim of surety bond will be made against
him. The contractor is thus responsible and then the insurance company will pay
it to the customers.
It
is very important to take care of all the actions which are performed. Claim
activities happen while the business goes on. Whatever happens, it is the duty
of the principal to solve all the
disputes before the payment. Before dealing with a surety bond, you need to
understand whether it is appropriate for your business or not. For this, you
need to know the myths related to surety bonds. It is often thought that surety
bonds act as insurance for your company.
But instead, they act as insurance for the public and not for the
company.
Thus,
it is very important to know the terms and conditions of a surety bond and then
claim for it. Also, check the company which you are dealing with has legal
proceedings or not and also make sure that the principal has enough potential
to pay the intended amount with the given period of time.
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