What is surety bond, what is it used for and what are its advantages?

In order to speed up the processes that encompass the signing of a lease agreement, surety bonds have been used as an option. With it, tenants, real estate, and owners have advantages.

For the owner of the property is the receipt of guaranteed rent. As for the tenant, it is easier to rent a property, since they do not need the favor of a guarantor.

How about knowing more about it? Read on and learn more about this type of insurance!

What is a surety bond?

The surety bond is nothing more than a guarantee that the lessee hires to offer security to the owner of the property. Thus, it replaces other types of guarantee, such as guarantor or surety.

The period of validity of the insurance will depend on the agreement made and follows the lease term stipulated in the contract. However, at the end of the contract, it must be renewed.

Its operation is very similar to other types of insurance – vehicle or residential, for example. In this scenario, the difference is that, no matter how much the tenant makes the contract, the insured remains the owner of the property. In this way, he is the one who obtains the indemnities related to the policy.

What are the advantages of hiring him?

One of the biggest advantages of this service for the lessee is that there is no need for a guarantor. After all, this is usually a big obstacle when renting a property. Not to mention that it is embarrassing to ask someone else to be responsible for the risk of default.

Compared to another widely used type of guarantee, the surety bond, this type of insurance is usually easier to pay and cheaper in the short term. This is due to the fact that, generally, real estate agents or lessors require a deposit in the amount of 3 months of rent, which is a risk for the owner in case of default with the limitation of three rents.

Due to the fact that this amount is fully available at the time of signing the contract, it ends up making life difficult for the lessee. Therefore, bail insurance is very advantageous because it has a lower value and the possibility of installment.

In addition, the property owner also enjoys numerous advantages when opting for a surety bond when leasing his property. The fact is that security with regard to payment is one of the biggest advantages. As everything is done with the insurance company and is resolved much more quickly. It’s the guaranteed rent.

What does it cover and for whom?

The surety bond can use to cover the lease of various properties – commercial, residential, or industrial.

It is recommended for landlords looking to have more peace of mind in relation to default on their properties. Renters can also take advantage of this option. As there is no need to offer a security deposit or look for someone to be your guarantor for the rent.

Now, you know what bail insurance is and how it works. In this way, you saw that this is a great option for your rental contracts.

Thanks for reading this article by ExtNext, hope you will learn something about Surety Bonds.