Surety and Fidelity Bonding
Surety and fidelity bonds help minimize risk and protect yourself, your business, and your customers. Bonds are a special form of insurance that give you specific financial security for different situations.
A brief overview of Bonding policies:
A. A “Bond” is a guarantee that a specific job will be done, performance maintained, or an obligation fulfilled.
B. A “Fidelity Bond” protects an employer against dishonest acts of an employee. There are three parties to a bond:
- The principal – The party who will not perform dishonest acts,
- The surety – The party (insurer) who agrees to be responsible for the loss if the principal fails to keep this promise, and
- The obligee – The party to whom the promise is kept(the insured).
C. A “Surety Bond” is somewhat of the opposite; instead of guaranteeing something DOESN’T happen, it ensures something DOES happen:
- That someone will perform an action, or
- Someone will make a specified payment.
D. One of the differences between Fidelity and Surety bonding is that in Fidelity bonding, the obligee gets and pays for the bond, whereas in Surety bonding, the principal gets and pays for the bond.
E. Some types of Surety Bonds include:
- “Contract” bonds – guarantee contractual obligations. “Bid” bond – guarantees that a contractor will enter into a contract if it wins the bid.
- “Performance” bond – guarantees that the job will be completed.
- “Payment” bond – guarantees that the contractor will pay for labor and supplies.
- “Supply” bond – guarantees a supplier will provide supplies at a specified price and time.
- “Completion” bond – guarantees, when a contractor borrows money to fund the construction, that the project will be delivered free and clear of liens.
- “Judicial” bonds – guarantee that the principal will fulfill legal obligations.
- “Fiduciary” bond – bond fiduciaries bound by law to manage the property of others.
- “Court” bonds – settle legal arguments.
- “License and Permit” – guarantee compliance with laws regarding business activities.
We hope this information is helpful in learning a bit about insurance policies that can help your business. While there are so many options available, Value Insurance Agency Inc. can help your business navigate through the options and ensure you get the insurance that is right for you at the right price.
to begin setting up your policy today.