Lance Surety Bond Associates, Inc.

SB 490/860: Subdivision Bond

This bill will allow for the performance bond required for a subdivision or site plan application to be enlisted before or after the subdivision or site plan is recorded on the land records of the municipality. This is so long as no work begins until after the bond is posted.

To understand surety bonds, and how they work, it is best to start off by breaking them down into larger groups or categories. There are two major categories of surety bonds: Contract and Commercial Bonds. In this article, I will briefly explain what each of the previously listed bond types guarantees, and will also provide you with a few examples of each.

The first category of bonds I will discuss are contract bonds. Contract Bonds are purchased by a contractor (or principal) from a surety at the request of a project owner (obligee), and essentially provide obligee with assurance that the principal will perform in accordance with the terms of the contract (i.e. complete the work, pay subcontractors, material suppliers, etc.).

Examples of Contract Bonds:

Today, most surety bond consultant firms focus their efforts on internet sales and marketing. While the development of the internet has made the sale of certain bonds such as commercial bonds much easier, it has not been a major source of new business for all bond types. For instance, construction performance bonds, which generate some of the highest premiums of all surety bonds, have seen relatively small increases in new business generation via the internet, industry wide. To understand the significant difference in internet-based sales volume between commercial surety bonds and construction performance bonds we can look to three reasons:

1. Geographical location
2. Complex underwriting
3. Difficulty adjusting to new ways of doing business

Geographical location: When dealing with a construction performance bond, some sureties may have difficulty providing significant financial backing to a contractor (principal) and is not geographically close to their bond agent.

Complex underwriting: The paperwork involved in writing a construction performance bond (contract bond) can be much more time-consuming and complex than some of the commercial bonds out there.

Difficulty adjusting to new ways of doing business: We