is a legal and financial agreement where one party (surety) guarantees the performance or obligation of another (principal) to a third party (obligee).
If the principal fails to fulfill the obligation, the surety compensates the obligee.
Surety
is a three-party agreement used in the construction industry (and other contract-based projects) to ensure that a contractor fulfills the terms of a contract.
The three parties are:
* Principal – the contractor or person who must perform the contract.
* Obligee – the project owner (often a government agency or private developer) who requires the bond.
* Surety – the company (usually an insurance or bonding company) that guarantees the contractor’s performance.
Premium cost: 0.5 - 3% of bond amt
Contract Surety Bond
Types of CSB
is a type of contract surety bond that guarantees a contractor will honor their bid and enter into a contract if awarded the project.
Purpose:
It protects the project owner (obligee) by ensuring that the contractor (principal) does not withdraw or refuse to proceed after winning the bid.
Bid Bonds
Types of CSB
guarantees that the contractor will complete the project according to the terms, specifications, and schedule stated in the contract.
Purpose:
It protects the project owner from financial losses caused by a contractor’s failure to perform the work properly or finish on time.
Performance Bond
Types of CSB
ensures that subcontractors, laborers, and material suppliers are paid for their work and materials on the project.
Purpose:
It protects workers and suppliers by guaranteeing payment from the contractor, preventing liens or disputes over unpaid bills.
Payment
Types of CSB
also called a Warranty Bond, guarantees that the contractor will repair or replace defective workmanship or materials after the project is completed, within a specified warranty period.
Purpose:
It protects the project owner from defects or issues that arise after project completion, ensuring quality and long-term reliability.
Maintenance Bond
is a type of surety bond that guarantees a business or individual will comply with laws, regulations, or contractual obligations required by government authorities or professional bodies.
Commercial surety bonds are not meant to insure against losses, but rather to guarantee compliance and honesty in business operations.
- Real estate brokers and mortgage brokers, Auto dealers, Contractors and subcontractors, Customs brokers, Public officials and notaries
Premium cost: 1 - 10% of bond amt
Commercial Surety Bond
Types of CB
These are required by government agencies before granting a license or permit to operate a business. They guarantee that the business will follow all laws, regulations, and professional standards.
License and Permit Bonds
Types of CB
Required for professionals involved in arranging or selling home loans. This bond guarantees that the broker will follow all laws and ethical rules in handling clients’ money.
Mortgage Broker Bonds
Types of CB
Required by utility companies (like electricity, gas, or water providers) to ensure that customers or businesses will pay their bills on time.
Utility Bonds
Types of CB
is a bond required from businesses responsible for collecting or paying taxes to the government, such as alcohol distributors, fuel dealers, or tobacco sellers. It guarantees that the business will pay all taxes, duties, and fees correctly and on time.
Tax Bonds
is a type of bond that protects a business or organization from financial losses caused by the dishonest acts of employees, such as theft, fraud, or embezzlement. It serves as a financial guarantee that the employer will be compensated in case an employee who is bonded commits a dishonest act resulting in monetary loss. This bond helps promote trust, accountability, and security within an organization.
Premium Cost: 0.5 - 3%
Fidelity Surety Bond
Types FB
Protects clients or customers from losses caused by theft or dishonest acts of service employees while working inside homes or offices. This bond is commonly required for businesses like cleaning, repair, and maintenance services. It builds customer trust and ensures financial protection.
Business Services Bond
Types FB
Protects the employer from financial losses caused by dishonest acts of employees such as theft, fraud, or embezzlement. It is commonly used by businesses where employees handle cash and financial records. This bond ensures continued business stability after a loss
Employee Dishonesty Bond
Types FB
This type of bond protects retirement or pension funds from losses caused by dishonest acts of trustees or fund administrators. It is required to secure the money entrusted by employees for their future benefits. This bond ensures accountability among fund managers.
Fidelity Bond for Trustees of Pension Funds
Types FB
A Name-Schedule Fidelity Bond covers only specific employees named in the bond contract. It is usually used for employees holding highly sensitive or high-risk positions such as cashiers and finance managers. Coverage applies only to the listed individuals.
Name-Schedule (Individual) Fidelity Bond
is a three-party legal agreement that guarantees a person will fulfill a legal or contractual obligation required by the court. It serves as a form of financial security involving the principal (the person needing the bond), the obligee (the party requiring and protected by the bond, such as the court), and the surety (the company that issues the bond and guarantees the obligation).
If the principal fails to meet their responsibilities, the surety compensates the obligee for any losses, while the principal remains ultimately liable for repayment.
Premium cost: 0.5 - 5%
Court Surety Bond
Types CoSB
A ——— is a court-ordered surety bond posted by the defendant in a lawsuit. It guarantees that the defendant will pay any judgment, damages, or costs awarded by the court if they lose the case. This bond helps ensure the plaintiff can recover losses without delay once the court decision is final. It also may guarantee compliance with court orders during the litigation process.
Defendant Bond (accused)
Types CoSB
is required from a plaintiff seeking to initiate or continue certain legal actions, such as attaching or seizing a defendant’s property. It protects the defendant by guaranteeing compensation if the plaintiff’s claim is found to be wrongful, frivolous, or malicious, preventing abuse of court processes.
Plaintiff Bond (accuser)
Types CoSB
is a fiduciary bond required of an executor or administrator appointed by the court to manage and distribute the assets of a deceased person’s estate. It guarantees the faithful and honest performance of duties, including paying debts, distributing assets to heirs, and safeguarding estate property. This bond protects the beneficiaries and creditors of the estate.
Administrator’s Bond
Types of CoSB
is required when an individual is appointed by the court as a guardian to manage the affairs of a minor or incapacitated person (the ward). This bond ensures the guardian will act in the ward’s best interests, managing their finances and personal well-being responsibly, and accounting for all assets and expenditures.
Guardianship Bond
Types CoSB
is a type of court surety bond required when a defendant is arrested and needs financial assurance to be released from custody while awaiting trial. The bond guarantees that the defendant **will appear in court **for all required hearings and comply with any conditions set by the court. If the defendant fails to appear, the full bail amount becomes forfeited, and the surety is responsible for paying it.
Bail Bond
Types CoSB
A court surety bond required when a plaintiff wants to take back personal property before the case is finalized.
Ensures the plaintiff will return the property or pay damages if the court later decides they were wrong.
Purpose:
* Allows early recovery of property.
* Protects the defendant from loss, damage, or wrongful seizure.
* Ensures fairness while the case is still ongoing.
Replevin Bond
Types CoSB
is required when the court appoints a receiver to take control of property, assets, or funds during litigation, bankruptcy, or foreclosure proceedings. The bond guarantees that the receiver will manage and preserve the assets properly and honestly, preventing loss or misuse while under court supervision.
The main purpose of a receiver’s bond is to protect the property or assets placed under a court-appointed receiver. It ensures the receiver manages the assets honestly, responsibly, and without misuse during cases like bankruptcy or foreclosure.
Receiver’s Bond
