AAUG Insurance Company Ltd - Bid Bonds, Surety, and The American Assurance Underwriters Group AAUG Insurance Company is an international insurance company that specializes in providing high-quality insurance to people around the globe. Currently, we are writing a variety of surety bonds, including bid bonds. To eliminate any confusion on variations of industry terms, here are what we define as the three parties within a suretyship: 1. A Principal takes on the obligation 2. A Surety company, or Guarantor, guarantees the obligation will be performed 3. An Obligee receives the benefit of the bond
Learn more about surety bond basics here. What is a Bid Bond? A bid bond is a type of construction surety bond that is used as financial security for an Obligee during contract bid proposals.
How Does a Bid Bond Work? Typically, a project manager (Obligee) will have a contractor (Principal) file a bid bond with a Surety company (Guarantor) to guarantee serious bids are made and that the contractor has the financial means to make that bid. This is a standard requirement and is very common especially with large commercial development projects. A bid bond signifies that a Guarantor believes that the Principal will be able to execute the contract as per the bid. Should, for some reason, the Principal not be able to enter into the contract as agreed upon, the bid bond guarantees that the Obligee will be paid the difference between the Principal’s tender price and the next closest tender price. Somtimes, collateral is needed for the Principal to obtain a bid bond. Used like a bargaining chip, when an applicant doesn’t initially qualify for a loan, it can be used to sway the result in their favor.
Types of Collateral There are two common types of acceptable collateral: Cash: usually in the form of a cashier’s check, it is posted directly into an interest-bearing account with the Guarantor
Letter of Credit: the Principal provides a letter of credit from a bank that allows the Guarantor to draw from in the event of a claim
Learn more about collateral here. Why Choose AAUG for Bid Bonds? At The American Assurance Underwriters Group, we are staffed with specialists who have the expertise needed to write financially secure bid bonds for almost any situation. With over six years of writing bonds internationally, our primary focus is to assure that our clients receive the best service in the industry. Should you have questions about bid bonds, collateral, or any other types of international insurance, we have friendly associates ready to assist you. To learn more about AAUG, please visit us at www.aaug.com
For more information Contact us @ +1 (954) 315-3879 or visit @ – www.AAUG.com