It is not insurance…A Bond is issued by a licensed Insurance Company that is a financial guarantee. If called upon and properly proven up the Claimant will receive up to the total proceeds of the Bond. It is the Bonding Company’s sole judgment that decides whether or not to pay the amount complained for by the Caimant. Generally the only way that you can stop a Bonding Company from making payment whereby they have decided that you are liable is to go to court to stop that process from happening.
When the Bonding Company makes a claim they then send you a bill to pay for the amount that they have decided to pay and in many cases can pass on legal costs and associated expenses for which you are obligated as an indemnitor and guarantor of the bond. Simply put this is a financial instrument to meet the regulatory needs in the area for which you do business or to satisfy the needs of one of your customers or other contractors that award you additional business.
That’s the way it is in the insurance and non-insurance world.
With good health to you,
Don Bone, President