LICENSE AND PERMIT BOND
License bonds guarantee the Principal will comply with applicable codes and regulations established by the Obligee (The Obligee is usually a government entity such as a City, Town, or State).
CONTRACT PERFORMANCE BONDS
Contract bonds generally guarantee the performance of a written contract according to its terms and conditions. A bid bond guarantees that if a contractor is the low bidder on a project, he/she will enter into a contract and provide a performance bond.
A performance bond guarantees the contract will be completed according to its terms and conditions.
A payment bond guarantees payment of laborers, subcontractors, and material suppliers.
PROBATE AND OTHER COURT BOND
A probate bond guarantees an honest accounting and faithful performance of duties by fiduciaries/trustees. These bonds are required by courts or statutes as estates of deceased persons, incompetent persons, and minors are set up and administered.
BLANKET FIDELITY BOND
Blanket fidelity bonds provide the insured with coverage for covered property as a result of “employee dishonesty.” Fidelity bonds provide the insured with employee dishonesty coverage for all of its “employees” unless specifically excluded.
- Generally, new employees are automatically covered
- All employees are covered for the same aggregate amount
- Limit of liability applies “per occurrence” as defined in the policy
Common uses for a blanket bond include:
- Businesses with large numbers of employees
- Businesses with frequent employee turnover
- Organizations with voluntary or honorary positions (not for profit associations)
SCHEDULE FIDELITY BOND
Schedule fidelity bonds may be used in businesses where employees tend to have greater responsibilities combined with the handling of larger sums of money (real estate managers, bookkeepers, office managers, etc.)
- Provides the insured “employee dishonesty” coverage for selected employees
- Covered employees will be scheduled or named by position
- Employees can be covered for different amounts
- Limit of liability is per name/position scheduled
WHAT IS THE DIFFERENCE BETWEEN A SURETY BOND AND INSURANCE?
Surety bonds are used in numerous industries, in order to make these business fields safer to do business. Bonds exist to safeguard the interests of the general public, and the authorities that regulate different trades.
Since the terms “surety bonds” and “surety bond insurance” are both used to describe bonding, it’s easy to mistakenly think surety bonds are like insurance. In fact, these two forms of security serve completely different purposes.
In the case of insurance, you and other insured entities contribute premiums on a regular basis, so that the insurance company will offer you compensation if you incur any losses that are covered by the insurance. Insurance protects you, and insurance companies mitigate the risks you are facing in return for your regular payments.
However, surety bonds work differently. They are required from you or your business, to guarantee your honesty, performance, or abiding by certain rules, laws or regulations. Surety bonds protect parties that may be affected by your business, such as clients, subcontractors, or the state.
You also need to pay a premium in order to get bonded, but if you fail to fulfill your obligations under the bond, you might get a claim on your bond. With bonds, the premium covers the underwriting and pre-qualification services costs. Thus, the entire risk stays with you as the principal. If a claim against you is proven, it is your responsibility to repay affected parties.
Being bonded is a powerful sign for your customers and relevant authorities that you are safe to do business with. It boosts your business reputation, and sends a powerful message in marketing your company.