surety bond - What happens if a claim is filed against my bond - working table

What happens if a claim is filed against my bond?

When you file a commercial surety bond, the company agrees to pay for unpaid property taxes or other tax obligations that are owed by your business. If your business fails to meet its tax obligations, the governmental body which issued the obligation may file a claim against your bond. 

This does not mean that you have failed to meet your obligation; it simply means that there has been an outstanding balance due. It’s important to note that filing a claim doesn’t automatically disqualify you from being able to obtain future bonding capacity. 

The surety who issued your bond will review your situation, determine whether the original terms of the bonding agreement were met, and take appropriate action if they determine that your bond should be voided.

How can I avoid claims on my bond?

Many people do not even know that they are required by law to have insurance for their rental properties, but it is true. We all need to be aware of the good neighbor policy that insures our property against damages caused by tenants if the tenant has no insurance. 

It also protects us from unknown problems with our homes so we can enjoy them without worrying about surprise expenses when it comes time to sell them or pay taxes on them. Without this insurance, you would have a tough time selling unless you have a large sum of money in savings! 

The smartest way to protect yourself against claims on your bond is to insure it. When hiring an agent, make sure they are aware of all previous claims made on your insurance. Before applying for a new insurance policy, ask them if they require any information about the claim so that you can provide enough data to prevent any further problems. 

There are many ways to protect yourself against claims on your bond.

  1. You can put a “safety clause” on your bond to protect yourself against claims.
  2. Make no claims/specify no details about the incident when applying for a new insurance policy while your bond is still active for the old one.
  3. Always make sure you receive written consent from all parties involved before you attempt to claim your bond.
  4. Ask the court to add a safety clause that will prohibit or restrict any further legal action being taken on behalf of the claimant(s).
  5. When taking out a new policy, inform them of previous claims made and ask them if they would like to be named as co-insureds so that they are liable too.

How do you make a claim on a surety bond?

Generally, a claimant who has been wronged and is seeking damages files a claim with the court. The court then sends notice of the claim to the company that issued the surety bond.

The insurer can either consent to pay or defend against this claim. If it decides not to take any action within 90 days, then it will be deemed that they do not intend to contest the case, and injury compensation could then be awarded by the court in favor of the injured party.

If there are no assets available from which to recover damages via subrogation–which means essentially taking over another’s rights for reimbursement–then the amount of money paid out by way of injury compensation or any other settlement would have to come directly out of an insurer’s pocket.

In the event that a bond company does not have enough assets to pay a final judgment rendered by a court of law, then it could be compelled to post a bond up to the amount of that judgment. This is known as posting security, which may require either an indemnity bond or an appeal bond.

How is a surety bond determined?

Bond amounts can be determined in a number of ways. The surety may base the bond amount on your net worth, annual business revenue, or some other financial measure that they use to determine creditworthiness. In other cases, the surety will let you decide how much to get bonded for. 

If this is the case, the easiest way to get a high bond amount is by asking for one. Remember that if you have been in business for a while and have not had any claims against your bond up until now, you may only need a small bonding amount because there has been no activity to cause them concern. 

However, if it’s a new business with a little track record and few assets then it might require large bonds so as to protect the creditor, should something happen.

Do surety bonds have limits?

The bond required to issue a business license in many states is called a “surety bond.” The person or business that must file this bond is called the “principal,” while the “surety” provides protection if the principal fails to meet their obligations under state law.

There are limits on how much liability can be covered by surety bonds, but these amounts depend on state laws and your intended type of business activity. For example, general contractors will typically need to purchase more insurance than someone who wants to sell fireworks out of their home. 

Most states require small businesses with only one employee to only get workers’ compensation insurance, so it may not be necessary for them to purchase any other kind of commercial bonding.

Check us out to know more about surety bonds!

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