Surety & Fidelity Bonds
A surety bond or fidelity bond is intended to add a layer of protection to your business's interests.
This bond involves a guarantee to pay a specific amount to the obligee, in the event that the principal is unable to meet a specific obligation. For instance, a surety bond may be necessary to enforce a contract and protect the obliged party against losses in the event that the other party (principal) fails to meet the obligation. The entity that takes on this risk, and promises to make the payment in a surety bond is known as they surety.
There are different kinds of surety bonds, including:
- License and permit bonds
- Probate and other court bond
- Public official bond
- Miscellaneous surety bond
- Contract performance bonds
Contract performance bonds are necessary for most businesses to guarantee the performance of a written contract as indicated in the terms and conditions. Examples of contract bonds include:
- Bid bond - guarantees that the contractor with a lower bid on a given project will agree to enter into a contract and provide a performance bond
- Performance bond - guarantees that the contract will be fulfilled as directed by the terms and conditions
- Payment bond - guarantees payment of material suppliers, laborers, and subcontractors
Fidelity bonds are intended to cover the loss of business assets due to employee theft. These bonds are better referred to as employee dishonesty coverage, because they function more like traditional insurance policies as opposed to surety bonds.
Fidelity bonds are insurance programs that protect the policy holder for losses of company securities, monies, and other property caused by the fraudulent acts of specified employees who have shown intent to cause losses to the organization through fire, burglary, general theft, forgery, fraud, disappearance, computer theft, and other means.
There are two types of fidelity bonds:
- Blanket bonds - ideal for businesses with many employees and a high employee turnover, where all employees are covered for the same total amount, and new employees are automatically covered.
- Schedule fidelity bonds - used for specific employees who have greater responsibilities, and usually handle large sums of money. The cover may vary depending on the position of the employee.
For more information on surety and fidelity bonds, please contact Capital Providers Insurance Services.