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glossary of bonding terms
Bid Bonds
A bid bond guarantees that the bidder (principal) will actually enter into the contract at the bid price stated
and will provide the required performance and payment bonds to the owner (obligee). top of page.
Fidelity Bonds
While called bonds, these obligations to protect an employer from employee-dishonesty losses are really insurance
policies. These insurance policies protect from losses of company monies, securities, and other property from employees
who have a manifest intent to cause the company loss. There are also many other forms of crime-insurance policies
(burglary, fire, general theft, computer theft, disappearance, fraud, forgery, etc.) to protect company assets.
top of page.
Financial-Institution Bonds
As with fidelity bonds outlined above, Financial-Institution Bonds are technically insurance policies. They protect
against loss of bank assets and depositor assets (as a commercial crime-policy does). The only difference is that
the insured is a financial institution with much more currency-loss exposure than a standard commercial business.
top of page.
Fiduciary Liability
These obligations are classified as bonds but are really insurance policies. These policies protect employee-benefit
trustees from personal loss due to their error, omission, or wrongful act as it regards management of an employee-benefit
plan of any kind. top of page.
Judicial Bonds
Bonds in judicial proceedings are filed by parties engaged in litigation to procure the benefits of relief afforded
by law, such as Replevin, Attachments, Garnishments, etc. These bonds guarantee to the opposing party payment of
the opposing party's costs and damages in the event the Court's judgment is in favor of that opposing party. top of page.
License/Permit Bonds
License and Permit bonds take on may shapes and sizes. Most of these obligations are brought about by a statute
of some kind for the protection of the general public. An example is the Commercial Contractor's License bond in
The State of Arizona, USA. In this bond, the principal (contractor) promises to build all buildings in accordance
to statutory building codes. The obligee is The State of Arizona and the people in the state who may contract for
the contractor's services. top of page.
Payment Bonds
The payment bond protects most providers of material and labor to a job. It guarantees that the contractor will
pay bills in accordance with the contract terms. top
of page.
Performance Bonds
A performance bond protects the owner (obligee) from financial loss caused by the contractor (principal) who fails
to build the project in accordance with the terms, specifications, and conditions of the contract for construction.
top of page.
Probate Bonds
Probate bonds, or bonds filed in a probate court, apply to all types of bonds required of persons appointed to
positions of trust by the court, such as Guardians, Executors, Administrators, Receivers, etc. These bonds guarantee
the faithful performance of duties and an equitable accounting for property received and distributed. top of page.
Self-Insurer Bonds
These bonds arise when an employer decides to self-insure a large portion of potential workmen's compensation exposure.
The bond guarantees that the employer (principal) will pay workmen's compensation benefits to any worker injured
during the time period in which the bond is in force. top
of page.
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