What to Look for in a Commercial Surety Bond Form

What to Look for in a Commercial Surety Bond FormInsurance agents will occasionally write a commercial surety bond as an added service to their clients. These agents know their way around property-casualty forms, but they’re not always familiar with bond forms. After all, there are literally thousands of different state and local bonds. The good news is that all bonds contain standard language that agents can learn to identify and check before submitting a bond for approval.

Let’s review the key elements of a commercial bond form, so you’ll know what to look for and can spot any potential problems. Keep in mind that many bonds can be issued quite quickly and may not need to be referred to underwriting. Often it is a matter of knowing how to fill out a bond form on a surety company’s portal. To fill it out correctly, though, you need to understand what’s being asked.

Name Of The Principal And Surety

At the top of all bonds, you’ll see a place to fill in the name of the principal (your client) and the surety company. The obligee (the state or locality that requires the bond) is named as well. Sounds simple, but many forms start off with a jumble of blank fields that can be intimidating at first. Just remember that a bond is a three-way contract between the obligee, the principal and the surety. All three must be named in the bond.

Amount Of The Bond

The dollar amount of the bond limit will be noted, or you’ll need to fill in the amount. This is sometimes known as the penal sum. It’s what the surety company agrees to pay the obligee if the principal fails to meet their contracted obligation.

Statute or Legal Requirement

Legally required bonds will cite the statute or code that authorizes the issuance of the bond. Check to see if this language is present. The underwriter will be looking for it and will want to be sure the bond meets the requirements of the statute.

Cancellation Clause

Sureties like to see a cancellation provision included in the bond. This language describes the circumstances under which a surety can terminate its obligation to pay a claim. It also spells out the termination notice requirements.

See Also: Is It Possible to Cancel a Bond?

Aggregate Liability Clause

Sureties also like to see limits on the aggregate amount they would have to pay out. This clause places a cap on the surety’s liability.

Bond Number And Effective Date

All bonds have a bond number (usually at the very top). There may also be an effective date. If not, the bond will become effective on the date it’s signed.


Both the principal and a surety representative sign the bond. The agent has power of attorney to act on behalf of the company and to sign bonds. The signatures are usually witnessed and need to be sealed with a crimper or stamp.

Some Bonds Can Be Issued Immediately

Many license and permit bonds can be purchased online through a surety’s portal. You or your customer service representative can log in and select the type of bond your client needs. Most sureties maintain a digital bond library, which speeds the process of applying for a bond. If the bond you need is in the library, you can fill it out and submit it online. In many cases, you’ll be able to purchase and issue it immediately.

To find out more about Old Republic Surety’s commercial bond services and how to use our BONDSTAR portal, contact a local branch office.

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Valerie McCormick

Valerie is a Senior Commercial Underwriter for Old Republic Surety and has been in the Surety and Fidelity Industry 30+ years. She enjoys being a resource to the agent plant, customers and peers and remains intrigued by the Surety industry. Valerie really enjoys the diversity our presence in the surety industry brings to the industry, and continues to learn something new every day.