What does a surety most commonly require as part of the bonding process?

The bonding process involves a range of steps to assess the credibility and reliability of the principal (the party requiring the bond). A surety most commonly requires the completion of an application that includes an indemnity agreement. This is crucial because the indemnity agreement provides the surety a safeguard against potential losses it may incur if the principal fails to fulfill their obligations under the contract.

An indemnity agreement essentially assures the surety that they can seek recovery from the principal for any claims paid out, thus providing a layer of financial security for the surety. The application process often involves gathering extensive information about the principal’s financial status, creditworthiness, and business history, which helps the surety evaluate the risk involved in issuing the bond.

While personal guarantees, proof of previous bonding success, and legal representation can be relevant in certain contexts, they are not as universally required as the completion of an application with an indemnity agreement during the bonding process. The application with the indemnity clause is fundamental to establishing the principal's obligation to indemnify the surety, making it a cornerstone of surety bonding practices.