Surety Bonds

 

Surety  Bonds are three-party agreements in which the issuer of the bond (the  surety) joins with the second party (the principal) in providing  protection to a third party (the obligee) regarding fulfillment of an  obligation on the part of the principal. An obligee is the party  (person, corporation or government agency) to whom a bond is given. The  obligee is also the party protected by the bond against loss.  Here are a  few common Surety bonds.   
 
 

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BID BOND

 Provides  financial assurance that the bid has been submitted in good faith, and  that a contractor will enter into a contract at the amount bid and post  the appropriate performance bonds. These bonds are used by owners to  pre-qualify contractors submitting proposals on contracts. 

CONTRACT BOND

 A general classification of bonds that provide  financial security and construction assurance on building and  construction projects by assuring the project owner (obligee) that the  contractor (principal) will perform the work and pay certain  subcontractors, laborers, and material suppliers. 

LICENSE AND PERMIT BOND

 License and Permit Bonds are required to obtain a  license or permit in many cities, counties, states or other political  subdivisions. They may be required for a number of reasons, including  the payment of certain taxes and fees or providing consumer protection  as a condition to granting licenses related to selling things such as  motor vehicles or contracting services. 

PAYMENT BOND

 Payment bonds cover payment of the contractor's  obligation under the contract for subcontractors, laborers, and  materials suppliers associated with the project. Since liens may not be  placed on public jobs, the payment bond may be the only protection for  those supplying labor or materials to a public job. 

PERFORMANCE BOND

 Performance Bonds cover performance of the terms  of a contract. These bonds frequently incorporate payment bond (labor  and materials) and maintenance bond liability. This protects the owner  from financial loss should the contractor fail to perform the contract  in accordance with its terms and conditions. 

FIDELITY BONDS

 

Bonds designed to  protect against dishonesty. These bonds cover losses arising from  employee dishonesty and indemnify the principal for losses caused by the  dishonest actions of its employees.
Fidelity  bonds guarantee that the bonded employee(s) will handle their  employer's money and property with fidelity. In other words, it  guarantees they won't steal.

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EMPLOYEE DISHONESTY BOND

 Employee Dishonesty Bonds guarantee that the bonded employee(s) will handle their employer's money and property with fidelity. Small  companies can be especially hard hit because they can't afford  extensive safeguards and do not have the financial capacity to absorb  the losses. 

JANITORIAL SERVICES BOND

 Those that provide janitorial services can be  vulnerable due to employee access to customers assets, equipment,  supplies and personal belongings. This bond is specifically designed to  provide protection for this sort of potential problem. includes what they do, how long they’ve been at it, and what got them to where they are.

PENSION TRUST (ERISA) BOND

 Pension Plans and profit sharing programs are managed by appointed individuals known as plan fiduciariesThe  Pension Reform Act of 1974 states that the fiduciaries of a pension or  profit sharing fund are required to post a bond for 10% of the amount of  funds handled.