A surety bond is kind of an insurance or guaranty agreement that includes three parties or individuals. The first party is the debtor or the person who owes money or services to another party. The second party is the principal which can be an individual or a company which is secured with the surety bond and the third party is the insurer or guarantor that signs the bond in order to ensure the principal that the debtor will pay his money or services to the creditor or principal.
Most common types of Surety Bonds:
- Court Bonds:
This is the most common type of surety bond in which a third party ensures the court that if the court gives bail to a person, he will attend the court hearings in order to proceed with the case and if he doesn’t show up in the court, the undersigned of the bond will be held responsible.
- Bail Bonds:
When an accused appeals for bail in the court, the court might ask him to deposit a certain amount of money as insurance of his bail. A small percentage of that amount is paid by the accused where the rest of the money is paid by another person or a bail agency. Once the accused person shows up in court hearings after his bail, the bail money is returned to the depositors.
- License Bonds:
A license bond is issued by the local government department in order to allow or permit a contractor to work on a project. Usually a license bond is required when a company invites bids for a project and wants to ensure if the principal will provide the agreed services or not.
- Contract Bonds:
Contract bond is also known as the contract agreement which is signed between a company or an individual and a contractor. The contract bond makes the contractor obligated to provide the services that he agreed by sending the offer to the bid and these terms and conditions are included in the contract bond as well as in the bid advertisement.
- Fidelity Bonds:
Fidelity bonds are signed by companies and insurance firms and these bonds prevent the company from any liabilities or losses that are caused by the individuals or employees of the company.
Benefits of the Surety Bond:
There are many advantages and benefits of using surety bonds but the most important benefit of this bond is that it fulfills all the legal requirements but doesn’t require the involvement of legal help in the process. For example, you want to hire a contractor for some construction work on your property and you want the contractor to first acquire an insurance policy so that if he causes any damage on your property, you don’t need to face any loss. This can take weeks for the contractor along with expenses in form of fees and charges. A simpler way to provide insurance is to introduce a third party that will sign the contract with the contractor and the individual. This means that if the contractor causes any damage on the site or fails to complete the job on time, the individual can hold the guarantor responsible for these liabilities.
Here is preview of a Free Sample Sample Surety Bond created as fillable PDF form,
Here is download link for this Sample Surety Bond,