Types of Surety Bonds
1. Contract Bonds: The bonds are applied, e.g., during construction projects, in the protection of contractors fulfilling their contracts or paying the bills of subcontractors and suppliers methods.
2. Commercial Bonds: Commercial bonds, including license and permit bonds, are obtained by government entities or private organizations whenever a business person or entity is in need of either a license or a permit or the operation of a certain type of business. Examples are the bonds for contractor licensing, auto dealer bonds, and liquor licensing.
3. Court Bonds: Court bonds are appropriate in legal proceedings for surety purposes. Those serve as a guarantee that certain duties or obligations will be performed. There are three of them, such as an appeal bond, a probate bond, and a guardianship bond.
4. Fidelity Bonds: Fidelity insurance, well-known as employee dishonesty or fidelity bonds, protects employers from the risks of dishonest employees by offering bonding to replace the losses that stem from fraud and theft.
5. Bid Bonds: During the process of project awarding, the function of a bid bond is to allow a project owner to be confident that there are chances of a contractor fully implementing the agreement, and where demand or pricing of bonds exists, a contractor will be obliged to give the specified performance and payment bonds in instances of being awarded the contract.
6. Performance Bonds: Through this performance bond, the contractor has to complete the solution execution within the very preset timeline defined by the contract. These are the rights that enable the suppliers of capital to secure their investment when the contractor does not fulfill the pre-agreed obligations.
7. Payment Bonds: Additionally, Payment Bond’s purpose is to ensure that the contractor uses the allocated funds allotted to him for paying different crew members, laborers, and commercial companies that assisted in the construction processes. They excel at the risk of not being paid to those who have the human capital and resources required to make an output of reasonable quality.
8. Maintenance Bonds: By using the maintenance bond’s feature of a stipulated amount of time for top-notch workmanship and materials, they empower management assurance after the termination of the task.