Surety Bonds

A surety bond is a promise to pay one party a certain amount if a second party fails to meet some obligation, such as fulfilling the terms of a contract. The surety bond protects the obligee against losses resulting from the principal's failure to meet the obligation. 

Contract Surety Bonds

Contract bonds are a guarantee from a Surety to a project's owner that a general contractor will adhere to the provisions of a contract. Included in this category of bonds are:

  • Bid Bonds
  • Performance Bonds
  • Payment Bonds
  • Maintenance Bonds

 Commercial Surety Bonds

Commercial bonds represent the broad range of bond types that o not fit the classification above. These bonds are divided into four sub types: license and permit, court, public official, and miscellaneous.
 
License and Permit Bonds
License and Permit bonds are required by certain municipial, state, and federal governments are prerequisites to receiving a license or permit to engage in certain business activites
Some specific examples include:
  • Contractor's License Bonds
  • Tax Bonds
  • Reclamation and Environmental Protection Bonds
  • Broker's Bonds
  • ERISA (Employee Retirement Income Security Act) Bonds
  • Motor Vehicle Dealer Bonds
  • Money Transmitter Bonds
  • Health Spa Bonds
 
Court Bonds
Court bonds are those bonds prescribed by statue and relate to the court system. They are broken down further into fiduciary bonds and judicial bonds. Fiduciary bonds are filed in probate courts; they guarantee that persons whom such courts have entrusted with the care of others' property will perform their specified duties faithfully. Judicial bonds arise out of litigation and are posted by parties seeking court remedies or defending against legal actions seeking court remedies.
 
Public Official Bonds
Public official bonds guarantee the honesty and faithful performance of those people who are elected or appointed to positions of public trust. Examples of this type of bonds include: treasurers, commissioners, judges, town clerks, law enforcement officers, and Credit Union volunteers.
 
Miscellaneous bonds
Miscellaneous bonds are bonds that don't fit well under any other classification Examples of miscellaneous bonds are: lost securities bonds, hazardous waste removal bonds, self-insured workers compensation bonds, and credit enhancement financial guarantee bonds.
 
Fidelity Bonds*
Fidelity bonds cover theft of an employer's property by its own employees. Fidelity coverage functions typically as a traditional insurance policy rather than a surety bond even though it is referred to as a bond.