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What is a Bond?
By definition, a bond is a thing used to tie something or to fasten things together or an agreement with legal force, in particular.
When applied to the insurance surety world, a bond binds one entity or person to another entity or person with financial consequences as well as a third party, the insurance company. In this case, the insurance company is counting on the idea that the promises and responsibilities of the contract holder are successfully fulfilled by the person or entity performs the work. Should the entity performing the work fail to complete the project as agreed upon, the surety company will source another group to ensure that the contractual obligations are fulfilled. Subsequently, any monies paid out by the bonding company in order to satisfy the terms of the contract will be collected from the initial contractor that did not satisfy the terms of the agreement.
In the insurance world, there are over 300 different types of bonds. However, the two most common categories are commercial surety and contract/construction surety bonds.
- Commercial Surety Bond – This category includes a vast variety of bond types. The majority of them are in place to provide security that the person or entity performs their duties in a legal and ethical manner without fraud, deception or dishonesty. At a high level, these bonds ensure that you are who you say and are capable of doing what you say you will. Some examples of commercial surety bonds are license and permit bonds, auto dealer bonds, employee dishonesty bonds, appeal bonds, trustee bonds, and notary bonds.
- Contract Surety Bond – This is a much smaller category as it is typically associated with the construction industry. Contract surety bonds guarantee that the service provider, contractor, supplier or developer will fulfill the contract per the plans and specifications of the agreement as well as pay all outstanding liabilities associated with that contract (labor, materials, and subcontractors). The main types of surety bonds for these are bid bonds, performance bonds, payment bonds, supply bonds, site improvement bonds, and subdivision bonds.
Learn more about bonds in our blog
Some bonds we handle include, but are not limited to, the following:
- Contract performance bonds
- Bid bonds
- Maintenance bonds
- Payment bonds
- Supply bonds
- License and permit bonds
- Miscellaneous bonds
- Subdivision bonds
- Oil & Gas Single Lease bond
- Plug & Abandonment bond
- Oil & Gas Activity Blanket bond
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