Surety Bonds and Protection Against Monetary Losses

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Surety Bonds and Protection Against Monetary Losses

Many people these days are looking to grow the value of their investment portfolios. The economic slump that came as part of the Great Recession destroyed the value of portfolios, and even during the recovery many people have still not recouped their losses. As a result, more and more individuals are seeking financial protection and security.

Traditionally, one of the safer vehicles of investment has been the purchase of bonds. Bonds are essentially loans to companies or governments over set periods of time. Bonds can either mature (meaning that the loan is repaid) or they can be sold prior to the date of maturity. Bonds tend to be both lower risk and lower return, and they can be a good way to secure your money, depending on the risk rating of each bond.

One of the ways you can gain monetary protection is through the use of surety bonds. These types of bonds include the promise of a separate party to pay the creditor (the investor) in the case that the debtor defaults on the bond agreement. In other words, surety bonds are a way for you to get some financial protection and ensure that your investment is safer than traditional bonds. Surety bonds can give you some peace of mind because your loan to a company or government is backed by another party, making it more likely to see the promised return on your investment.

It is important to keep in mind that as with any other investment, you are not guaranteed against losses. While surety bonds give greater protection against the loss of principal, they can be risky because the third party contractor may go out of business or be unable to pay the debt in case the original creditor defaults on the bond. Surety bonds come at a price of between one and five percent, depending on the contract, and most larger contractors charge lower fees.

Overall, surety bonds are a good way to go if you are looking to gain security on your bond investment. While they are not completely risk-free, they can decrease your liability in the case of a default.