What is a Surety Bond Claim?April 17, 2012 — 1,399 views
A surety bond is a form of guarantee that an obligation will be completed. According to the Small Business Administration (SBA), an obligee (which is often a business) seeks a principal (contractor) to fulfill a requirement. To ensure the obligee successfully meets the obligation on time, the principal can buy a surety bond to make the contractor responsible if the job is not completed as the contract specifies.
If the principal defaults, the obligee may request the bonding company to either replace the principal or file a claim to retrieve compensation. The company will file a surety bond claim, return the funds to the obligee and then seek action against the principal for the loss of revenue of both parties, which may include the original contracted payment and legal fees, according to JW Surety Bonds.
A surety bond is not insurance. However, it is a guarantee to receive the terms listed in a contract. Government departments or organizations make up a large percentage of obligees, reports the source. This may be due to the number of contracts agencies make every year and a desire to protect taxpayer dollars.