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What is a Surety Bond
A surety bond is a written agreement where one party, the surety, obligates itself to a
second party, the obligee, to answer for the default of a third party, the principal.
There are two categories of surety bonds:
Contract Surety Bonds
Contract Surety Bonds provide financial security and construction assurance on
building and construction projects by assuring the project owner (obligee) that the
contractor (principal) will perform the work and pay certain subcontractors, laborers,
and material suppliers.
Contract surety bonds include:
Commercial Surely Bonds
- bid bonds, which provide financial assurance that the bid has been submitted
in good faith, and that the contractor intends to enter into the contract at the
price bid and provide the required performance and payment bonds.
- performance bonds, which protect the owner from financial loss should the
contractor fail to perform the contract in accordance with its terms and
- payment bonds, which guarantee that the contractor will pay certain
subcontractors, laborers, and material suppliers associated with the project.
- maintenance bonds, which normally guarantee against defective workmanship
or materials for a specified period.
- subdivision bonds, which guarantee to a city, county, or state that the principal
will finance and construct certain improvements such as street, sidewalks,
curbs, gutters, sewer, and drainage systems.
Commercial Surety Bonds guarantee performance by the principal of the obligation
or undertaking described in the bond.
Commercial surely includes:
- License and permit bonds, which are required by state law or local regulations
order to obtain a license or permit to engage in a particular business, e.g.
contractors, motor vehicle dealers, securities dealers Blue Sky bonds, employment agencies, health spas, grain warehouses, liquor, and sales tax.
- Judicial and probate bonds, also referred to as fiduciary bonds, secure the
performance on fiduciaries' duties and compliance with court order, e.g.
administrators, executors, guardians, trustees of a will, liquidators, receivers,
and masters. Judicial proceedings court bonds include injunction, appeal,
indemnity to sheriff, mechanic's lien, attachment, replevin, and admiralty.
- Public official bonds, which guarantee the performance of duty by a public
official, e.g. treasurers, tax collectors, sheriffs, judges, court clerks, and
- Federal (non-contract) bonds are those required by the federal government,
e.g. Medicare and Medicaid providers, customs, immigrants, excise, and
- Miscellaneous bonds, e.g. lost securities, lease, guarantee payment of utility
bills, to guarantee employer contributions for Union fringe benefits, and
workers compensation for self-insurers.
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10363 Hole Ave Riverside, CA 92505-1747 Phone: (951) 359-0950