Types of Surety Bonds
There are a number of surety bonds out there in the market, each one specifically designed. They all have different obligations and forms, so it isn’t surprising to learn that even the most experienced contractors sometimes forget how each surety bond differs. Let’s dive into some terminology and clear up some common misconceptions about surety bonds and what they cover.
A license bond just guarantees that the person doing the work will abide by all the right laws and regulations that are set by the obligee, which is usually a government entity. Permit bonds grant contractors some sort of privilege. The different types of license and permit bonds include, but are not limited to, electrician’s license, plumber’s license, general contractor’s license, driveway permit, sign permit, and sales tax. Most contractors post bonds as part of their licensing. This ensures that they will be following the electrical codes for the city or town which he does work in.
Public Official Bonds
Another type of bond is that which protects government officials in the event that they cannot perform their duties. People such as treasurers, Tax Collectors, Peace Officers, Judges and Notaries are eligible to get public official bonds. An example of a professional getting a public Official Bond would be a legislator who wants to protect himself from a lawsuit if he is unable to make due on promises.
Finally, there are probate and other court bonds. These guarantee that honest accounting practices will be upheld by fiduciaries and their trustees. These bonds are required by courts. Type of these bond are administrator, guardian, and trustee. In addition to these court bonds, a bankruptcy or equity bond might be required of an appointed fiduciary for the sale of real estate or for property in foreclosure.
There are many surety bond types, all are meant to protect the parties involved. Be sure to ask your insurance broker which type of surety bond will be right for you.