Union Bonds

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Continue below to learn more about union bonds and request a quote. If you have additional questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond experts.

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FREE UNION BOND QUOTE

What Are Union Bonds?

Union bonds are classified as a type of financial guarantee surety bond because they guarantee that a company hiring union members will make the necessary contributions for union dues, wages, and/or benefits under the terms of the applicable collective bargaining agreement. That’s why union bonds are sometimes referred to as wage fund bonds, welfare fund bonds, or wage and fringe benefits bonds.

Who Needs Them?

Any company that wants to hire members of a particular union must have signed an agreement with that union. Such agreements typically include a bonding requirement. Requiring an employer to purchase a union bond helps ensure that union members working for the employer receive the wages and benefits that the collective bargaining agreement entitles them to.

Each union imposes its own bonding requirements, and it’s not unusual for larger companies to have collective bargaining agreements with more than one union. In all cases, an employer must have purchased the required union bond before hiring union members. The bond must remain in place for as long as the union’s members are working for the company.

How Do They Work?

The surety bond agreement for a union bond is a contract that is legally binding on these three parties:

  • The union requiring the bond and establishing the required bond amount is the “obligee,”
  • The company hiring union employees and purchasing the bond is the “principal,” and
  • The firm underwriting and issuing the bond is the “surety.”

The terms of the surety bond agreement spell out the conditions that the principal must meet in order to avoid claims against the union bond. For example, terms may include depositing a certain amount of money per employee into the union’s wage fund on a given schedule. 

Failure to live up to the terms of the surety bond agreement can lead to the obligee filing claims against the bond to collect the unpaid contributions from the principal. In deciding to issue a union bond, the surety is agreeing to extend credit to the principal for the purpose of paying claims.

What Happens When a Claim is Filed?

When a valid claim is filed, the surety typically pays it directly to the obligee, which creates a debt that the principal is legally obligated to repay to the surety. In most cases, that repayment can be made in installments rather than in one lump sum.

What Do They Cost?

The surety’s main concern is being repaid by the principal for the credit extended in paying claims on behalf of the principal. In the surety bond industry, financial guarantee bonds, and particularly union bonds, are considered riskier than other types of surety bonds. For this reason, the underwriting standards are higher. The surety will check the principal’s personal credit score and examine both personal and business financial statements.

The premium the principal will pay is a small percentage of the union bond’s total required amount. That amount is usually based on the number of employees and the size of the principal’s contributions to the union.

The premium rate for a principal with excellent credit is usually in the range of 1% to 3%. A company with poor credit or a history of prior union bond claims may pay a higher rate.

At Surety Bonds Agent, we offer a full range of surety bonds nationwide through an extended carrier network. Continue below to learn more about union bonds and request a quote. If you have additional questions or want to explore bonding solutions for your business, speak with one of our knowledgeable surety bond experts.

CONTACT US FOR A

FREE UNION BOND QUOTE

What Are Union Bonds?

Union bonds are classified as a type of financial guarantee surety bond because they guarantee that a company hiring union members will make the necessary contributions for union dues, wages, and/or benefits under the terms of the applicable collective bargaining agreement. That’s why union bonds are sometimes referred to as wage fund bonds, welfare fund bonds, or wage and fringe benefits bonds.

Any company that wants to hire members of a particular union must have signed an agreement with that union. Such agreements typically include a bonding requirement. Requiring an employer to purchase a union bond helps ensure that union members working for the employer receive the wages and benefits that the collective bargaining agreement entitles them to.

Each union imposes its own bonding requirements, and it’s not unusual for larger companies to have collective bargaining agreements with more than one union. In all cases, an employer must have purchased the required union bond before hiring union members. The bond must remain in place for as long as the union’s members are working for the company.

The surety bond agreement for a union bond is a contract that is legally binding on these three parties:

  • The union requiring the bond and establishing the required bond amount is the “obligee,”
  • The company hiring union employees and purchasing the bond is the “principal,” and
  • The firm underwriting and issuing the bond is the “surety.”

The terms of the surety bond agreement spell out the conditions that the principal must meet in order to avoid claims against the union bond. For example, terms may include depositing a certain amount of money per employee into the union’s wage fund on a given schedule. 

Failure to live up to the terms of the surety bond agreement can lead to the obligee filing claims against the bond to collect the unpaid contributions from the principal. In deciding to issue a union bond, the surety is agreeing to extend credit to the principal for the purpose of paying claims.

When a valid claim is filed, the surety typically pays it directly to the obligee, which creates a debt that the principal is legally obligated to repay to the surety. In most cases, that repayment can be made in installments rather than in one lump sum.

The surety’s main concern is being repaid by the principal for the credit extended in paying claims on behalf of the principal. In the surety bond industry, financial guarantee bonds, and particularly union bonds, are considered riskier than other types of surety bonds. For this reason, the underwriting standards are higher. The surety will check the principal’s personal credit score and examine both personal and business financial statements.

The premium the principal will pay is a small percentage of the union bond’s total required amount. That amount is usually based on the number of employees and the size of the principal’s contributions to the union.

The premium rate for a principal with excellent credit is usually in the range of 1% to 3%. A company with poor credit or a history of prior union bond claims may pay a higher rate.

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Request a quote online or call today to speak with one of our surety bond experts about obtaining a union bond prior to hiring union members as employees.