This is a blog post is for those that may want to understand the basics of surety bonds. We will continue to share information about the wonderful world of surety over time. Seaman’s Insurance Group is Florida’s Premier Boutique Insurance and Surety Bond Agency. Check out our International Surety website here for all of your International Surety Bonds needs, or just check out our page on Seaman’s Insurance Group’s site here. We are happy to help you with all of your insurance and surety bond needs.
A Surety Bond is a risk transfer tool. Risk managers use surety to handle some potential loss exposures. Bonds can be used to transfer risk for all sorts of entities including: Governmental, Businesses and Individuals. Those requiring bonds to transfer risk from parties who owe them for certain types of obligations (obligee/obligor relationship).
Three parties involved in a Surety Bond
There are three parties involved in a Surety Bond. They are the Principal(Obligor), Obligee and the Surety.
The Principal is the party being required to obtain the bond aka Olbligor.
The Obligee is the party that receives the surety’s guarantee that the Principal (Obligor) will perform or fulfill and obligation.
The Surety is usually an insurance company that guarantees the Principal (Obligor) will perform as required by a contract, permit or law.
Types of Surety Bonds
There are a large number of types of surety bonds that you may be asked to obtain. They all fall in the following categories: Contract Surety Bonds, Commercial Surety Bonds and Fidelity Bonds.
Contract Surety Bonds
Contract Surety bonds guarantee that the bonded contractor will perform in accordance with the signed agreement.
Commercial Surety Bonds
Commercial Surety Bond guarantee the performance of obligations. These obligations guaranteed do not arise from contracts. Those that might need a commercial surety bond would include plumbers that need a license bond, executors of wills or even a financial guarantee bond for payment of workers compensation. Commercial Surety Bonds each specify the guarantee that is provided by the bond.
Historically, Fidelity Bonds guaranteed the honesty of employees. Fidelity Bonds have been replaced by employee dishonesty insurance that covers a number of crime risks in addition to employee dishonesty.
Honesty bonds can be purchased for companies that send their employees into people’s homes or businesses without the additional crime coverages. These bonds are normally purchased when businesses need or want to market that they are bonded as in “insured and bonded” in order to standout from their competition that has not purchased this type of bond.
International Contract Surety
Check out our International Contract Surety website here for all of your International Surety Bonds needs, or just check out our page on Seaman’s Insurance Group’s site here. We are happy to help you with all of your insurance and surety bond needs.