What is a Surety Bond?
A surety bond is a written agreement in which monetary compensation is provided by the Surety if the Principal in question fails to complete their required responsibilities provided by the Obligee within a stated period.
Surety bonds include 3 main parties:
Surety
Responsible for answering to the Obligee regarding the Principal’s failure to perform.
Principal
Holds responsibility to perform responsibilities as outlined by the Obligee.
Obligee
Party to whom a bond is given and is protected against loss.
Who Needs a Surety Bond?
Commercial surety bonds scale and support a diverse range of industries and business sizes. The target audience may include professionals acting in a fiduciary role as well as individuals obligated to uphold active licensure. Common examples include construction companies for government projects, licensed professionals like notaries and auto dealers, and businesses in industries like transportation and trucking.
Common Surety Bond Types
License & Permit Bonds
These are required by government agencies to ensure a business operates according to law and regulations.
Examples: Contractor license bonds, auto dealer bonds, and notary bonds.
Fiduciary Bonds
These are court-ordered bonds that guarantee an individual will responsibly manage the affairs of another person, such as an estate or trust.
Example: Probate bonds.
Court Bonds
Also known as judicial bonds, these are used in legal proceedings to guarantee a party will comply with court orders or protect the other party from financial loss.
Example: Appeal bonds
Fidelity Bonds
Also called "theft guard" bonds, these protect a business from financial losses caused by employee theft or fraud.
Lost Instrument Bonds
Protect against losses if a valuable security or instrument is lost or stolen.
Surety Bond Diversity
Public Official Bonds
Public official bonds maintain limits on terms and duties.
Freight License Bonds
Ocean freight forwarders, non-vessel operating common carriers, and freight brokers are regulated by the Federal Maritime Commission and must receive a bond before getting their license.
Non-Contract (Federal Government) Bonds
These are often required by the federal government and include bonds for medical care providers, alcoholic beverage distributors, etc.