Types of Surety Bonds
What is a surety bond?
Surety bonds are three-party agreements where the obligee requires the principal provide a bond from a licensed and admitted surety company to honor the contract terms. If the principal violates those terms and if the surety company pays out any claims, the principal must make the surety whole.
There are several different types of surety bonds:
Bid Bonds – This ensures the bidder on a contract, if their bid is accepted, will enter into the contract and furnish payment and performance bonds if required.
Contract (or Construction) Bonds – Bonds are issued exclusively to contractors to guarantee that appropriate payment, maintenance, and performance is fulfilled during a construction project. This type of bond is high risk because the construction industry runs into many issues with project completion and added costs of projects. Premiums on these bonds can vary a lot due to high risk factor.
Commercial Bonds – Bonds that encompass specific license and permit bonds that cover professionals from mortgage brokers to auto dealers to telemarketers. Commercial bond rates are typically more predictable than contract bonds as long as the applicant has a healthy financial history.
License & Permit Bonds – Federal, state and local governments require many business industries to have this type of bond before the business can get a license or permit to start a specific project.
Court Bonds – Following many court proceedings, some courts require one party to file a court bond to verify their personal credibility and financial integrity and also to ensure they follow through with the task. A court bond is an umbrella term used to encompass a wide range of bond types used in court proceedings.
- Judicial Bonds – Bonds are sometimes required to limit losses that could result in a court ruling. Under this category, there are two bond types – appeal bonds and plaintiff-attachment bonds.
- Probate/Fiduciary Bonds – There are several types of fiduciary bonds that are required for an individual who is appointed a specific task following the court ruling such as custodian bond, executor bond, fiduciary bond, guardianship bond, nominal bond or personal representative, probate bond and VA fiduciary bond.
With over 50,000 surety bonds with differing bond requirements in the U.S. alone, it’s essential that the company managing your bonds is experienced with a dedicated surety department. At Rose & Kiernan, Inc., our surety practice is based on unparalleled experience, expertise and an ability to solidify relationships and trust among the parties involved in the bonding process. We are able to handle your most involved and specialized bonding needs, and are structured to deliver superior service and streamline surety solutions.
For more information on surety and how R&K’s expertise will help to meet all of your domestic and international bonding needs, please see the Surety section of our website.