Although somewhat similar to an insurance policy, a surety bond is an agreement among the obligee, the surety, and the principal party.
The principal party, responsible for performing an obligation for the obligee, pays a premium fee to the surety. In turn, the surety promises to reimburse the penal sum to the obligee if the principal fails to perform the obligation.
Surety bonds provide an additional incentive for the principal, making the obligee deem the principal as reputable and trustworthy. There are several surety bonds; depending on your requirement, here are a few common types.
This type of surety bond entices the obligee to enter into a contract with the principal. Often known as construction bonds, given their widespread usage in the construction industry, these bonds come in several variations:
Supply bonds – They guarantee that the suppliers will be paid the promised amount on time by the contractor.
Performance bonds – They guarantee that the terms of the construction contract will be fulfilled by the contractor.
Payment bonds – They guarantee that the full payment will be made to the subcontractors and other workers on a timely basis.
Bid bonds – They guarantee that when the contractor's bid gets accepted, they possess the resources to complete the project that they bid on.
Maintenance bonds – They guarantee that any repair or upkeep requirements will be fulfilled by the contractor for the specified time period once the construction project is completed.
These surety bonds are used in a wide variety of situations involving court proceedings, such as the bail bond, which guarantee that the defendant will appear for future proceedings or trial.
Other types of judicial bonds are also used in civil cases, such as appeal bonds, which protect the party that originally won the proceedings against any losses or damages that resulted from delays caused by an appeal by the losing party.
Also known as a fiduciary bond, probate bond, or an executor bond, it guarantees that the administrator or executor of an estate will perform the fiduciary duties to the beneficiaries with honesty.
License and permit bonds – These are often required by government agencies and state laws; for example, a health club bond may be necessary to ensure compliance with regulations or other bonds such as auto dealer bonds, customs bonds, carwash bonds, and more may ensure compliance with payments of taxes, environmental protection laws, and more.
Business service bonds – Also known as fidelity bonds, are used to protect the customers and the business from fraudulent actions or misconduct by the employees. For example, a cleaning business may get janitorial bonds to protect the clients against theft, property damage, or any other loss that the employees can incur during the service.
There are myriad situations that require one of the several types of surety bonds. If you're looking for title bonds, immigration bonds, lottery bonds, appraisal bonds, contractor license bonds, mortgage broker bonds, and more, reach out to bond specialists at SuretyEZ in Los Angeles.
Contact us at (800) 773-1663 or fill the form to get a free quote. Our team is equipped with extensive experience and knowledge to answer all your queries about buying the right surety bonds.