Does a surety bond pay for you?

Question

ok....

i am a licensed contractor in California and i have a bond with a Surety company, there was a claim against the bond and the Company is deciding to pay my client.

Do I have to pay the $12500 that they are going to give her?

or does the company pay?

PLEASE HELp!!

i am very stressed right now and need an answer quick!

please and thank you,

Darwin

Answer 1

A surety bond is a guaranty by the surety company that you have the assets to pay the debt.  Therefore, once the bond pays out, they will come to you for reimbursement.  So, you will ultimately have to pay the $12,500.  This is also why bonds are generally cheap.  This is good for the clients because they are guaranteed payment (up to the amount on the bond) if they have a legitimate claim against you, you can't run off (or declare bankruptcy & go back into business under another name which some contractors do) owing the client.

Could you have gotten insurance for the same circumstance?  You didn't say what happened so I do not know if it is possible.  Some things can be insured, some can't.  It would have cost you more up front but would have paid covered claims against you & you wouldn't have to pay out of pocket.