Category: 
November 19, 2007
First of all, a bond is not insurance and will pay nothing for property damage or liability claims that may arise in the course of your business. Basically, a bond is a “guarantee” that a person or business will:
- Comply with local or state laws or ordinances.
- Fulfill all obligations under a contract.
It is important to understand that there are numerous types of bonds for different professions and occupations, so we will take a look at some of the more common types of Surety Bonds.
A bond will normally fall into one of five categories:
A payment bond guarantees payment for all subcontractors and materials used in the completion of a contract.
This bond guarantees that all work will be performed in accordance with all provisions of a contract.
This bond guarantees that a business will actually do the work if its’ bid is accepted.
This bond guarantees reimbursement by a business’s failure to perform the work or failure to pay for materials or subcontracted work.
This bond is required by some state or local laws to obtain licensing in certain professions. |
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Discount Dental Plans Under $20 Discont Health Plans Under $60 |
There are normally three parties involved in the bond agreement:
The Principal is the person or business who accepts the contract. It is the primary responsibility of the business to abide by the contract. The Surety is the company who is property licensed by the state Department of Insurance to write bonds. There are situations where an individual can act as the Surety. The Obligee is the person or entity who would receive the benefits from the bond guarantee. |
A professional business insurance agent who works regularly with business owners should be familiar with bonds and will be able to advise you as to what type bonds might be needed in your business.
Glossary Insurance Terms: |A-C|D-H |I-M|N-P|R-T|U-W|
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