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A Bond is a financial guarantee. A bond financially obligates the bonding company (the surety), to pay an amount of money to
someone (the obligee) if you
(the principal) guaranteed a
service, product or payment and you don't do the service, product or payment.
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Bonds are unlike other forms of
insurance because if the surety pays on your behalf, you have to pay them back. Other insurance normally pays your claim, you pay your deductible and go
back to running your business.
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General Types of Bonds |
| Performance |
Guarantees a project
will be completed. The bond usually is written for the contract amount. |
| Payment |
Guarantees that a
payment will be made. |
| Bid |
Guarantees that
bidder, if awarded a job, will accept the contract and furnish performance and payment
bonds. |
| Sub-Contractor |
Guarantees performance
of work and payment of bills by a sub-contractor. |
| Sub-Division |
Guarantees
installation of streets, curbs, sidewalks, sewers, etc. within 1 year |
| Supply |
Guarantees supplier
will deliver materials or equipment per contract. |
| Demolition |
Guarantees performance
of work and sometimes payment. |
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ERISA and
Employee Honesty (or Dishonesty)
bonds are Performance Bonds. |
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Social Services Bonds are Performance Bonds. |
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Utility
and Tax bonds are Payment Bonds |
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