Contract Surety Bonds

This type of surety bond is used heavily in the construction industry where the surety guarantees their contractor (the “principal”) will meet the terms of the construction contract with the project owner (the “obligee”).  There are various types of contract surety bonds including:

• Bid Bond – This guarantees the contractor will enter into a contract if awarded the bid.
• Performance Bond – This guarantees a contractor will complete a job according to the specifications of the contract.
• Payment Bond – This guarantees a contractor will pay for the services they utilize during a project in particular subcontractors and material.
• Maintenance Bond – This guarantees a contractor will maintain a facility or structure for a specified period of time according to the terms of the contract.
• Supply Bond – This guarantees the contractor, who is the supplier here, will provide all the contractually obligated materials and supplies.

Commercial Surety Bonds

This category is the “catch all” for all other bonds that do not fit in the Contract Surety category.  There are six broad classifications underneath the Commercial Surety heading – License & Permit Bonds, Court & Judicial Bonds, Fiduciary Bonds, Public Official Bonds, Fidelity Bonds, and Miscellaneous & Federal Bonds.

• License & Permit Bonds – This class of bonds guarantees the entity posting the bond will comply with all statutes, regulations, and/or ordinances that govern their activities.
  • Residential Builders Commission, Commercial Builders, Plumbers, Painters and other utility companies usually are state required to supply these bonds along with their license applications.
  • USDA Bond, Social Security Administration Bond, Liqour Bonds and other Federal Goverment Bonds with certain business entities
  • A popular example is the South Carolina Residential Builders Commission Bond
• Court & Judicial Bonds – This class of bonds is written for parties in lawsuits as a guarantee required by the court in conjunction with litigation.
• Fiduciary Bonds – This class of bonds guarantees that whomever the court designates to handle someone’s property will perform their specified duties faithfully.
• Public Official Bonds – This class of bonds guarantees the honest and faithful performance of individuals in certain elected and appointed public positions.
  • Examples: Sheriffs, Sheriff’s Deputies, Magistrates, Clerks of Court, Magistrate Clerks, etc.
• Miscellaneous Bonds – These bonds do not fall in one of the categories above, but they protect consumers from contracts/agreements in which people fail to perform the agreed upon task.
  • Some examples of miscellaneous bonds include lost securities, wage & welfare, and utility deposit.
• Fidelity Bonds – This type of bond is also referred to as Employee Dishonesty Coverage and covers an employer from loss due to a dishonest act by its own employee. While called a bond, this actually functions like an insurance policy where it is a 2 party arrangement.  In fact, many insurance carriers cover this risk under their commercial package crime policy form rather than a bond form.

NOTE: This bond list is not exhaustive.  You should always meet with a qualified insurance professional to truly identify which bonds are needed for your exact situation.