What Is a Surety Bond?

A Surety Bond (not surity bond “which is a common misspelling”) is a guarantee or agreement that specific obligations will be fulfilled. If the Principal (Obligor/ the one making the guarantee) happens to default on his/or her agreement, the Surety company (Grantor) must perform the contract, duty, or obligation of the Principal, or Indemnify the Obligee (Beneficiary) for the actual loss.


A Surety bond is a general term for all bonds.  There are many different types of surety bonds normally they are required to obtain a specific license.  A Surety Bond is a three part agreement , The Principal, Municipality / Private Obligee, and Surety Company. The Principal is the business or individual applying for the surety bond.   The Obligee is the one requiring the Surety Bond. The Surety Company is the one writing the surety bond. There are literally thousands of different needs for a surety bond and it can become confusing at times when applying for one, so feel free to contact us with any questions you have. We have broken down some of the basic surety categories below to help you determine what type of surety bond is right for you or your clients needs.

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CONTRACT BONDS

The following may be required in connection with a contract:

  • BID BOND - Is a Surety bond filed by contractors, guaranteeing that in the event a bid is accepted, the successful contractor a Performance Bond.

  • PERFORMACE BOND - Is a Surety Bond (Contractors Bond) guaranteeing the contractor will faithfully perform contractual obligations to the Obligee.

  • LARBOR and MATERIAL BOND - A payment bond that protects the owner contracting for work against liens from subcontractors or laborers who are not paid for their services, and/or materials by the general contractor.

  • COMPLETION BOND - A surety bond guaranteeing that borrowed money will be used toward completion of a project.

  • SUPPLY BOND - A surety bond whereby a supplier (Principal) guarantees to perform under a contract to supply goods or materials to the contractor (obligee) in accordance with the terms of the contract.


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    COURT BONDS

    The following may be required in connection with a contract:

  • FIDUCIARY BOND - A Surety Bond required when an individual, such as an executor, administrator, or a guardian, is entrusted by the court to handle the property of others. Example: An executors bond, guardian bond, administrators bond, bond in lieu of probate,

  • LITIGATION BOND - A surety bond required when after a successful suit an individual wishes to freeze the assets of another party or to restrain the other party from trying to sell or hide certain assets. Example: Appeal bond, Injunction bond, attachment bond, sheriffs indemnity bond, Plaintiffs Replevin bond.

    • Other Bonds-Lost securities: for release or reissue of stocks, bonds, life insurance policies, checks, bank books, mortgage notes, etc.


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    LICENSE AND PERMIT BONDS

    A surety bond required by municipalities or other public bodies as a condition for granting a license or permit to engage in a specified activity. The License and Permit Bond guarantees that the party or individual seeking the license or permit will comply with applicable laws and regulations. Example: Mortgage Broker/Lender Bonds, Contractor Bonds, Auto Dealer Bonds.

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