Surety bond, also known as guarantee bond or fidelity bond is basically a promise that the third party (insurance company or a bank) will pay the specific amount if someone (principal or contractor) fails to perform the project as per the guidelines of the project. It is generally categorized into 3 main categories:
Contract Bonds: Contract bonds are the guarantee that the contractor will perform the job as per the specifications of a construction contract. It also assures that the contractor will pay the specified amount to the subcontractors, material suppliers and the laborers involved in the project.
Court Bonds: As the name suggests, court bonds are required by courts in the course of cases. These bonds can be further divided into- fiduciary bonds and judicial bonds. The cost of these bonds may vary depending on the type of bond, case and the place.
Commercial Bonds: These types of bonds are usually purchased by companies or working professionals for the purposes unrelated to legal issues, contract projects or other contracted jobs. Different types of commercial surety bonds include business service bond, employee theft bond, alcohol tax bond, license and permit bond, sales tax bond, utility bonds, etc.
Whatever type of surety bond it is, it still the owner that their project will be protected from loss due to your failure to comply with the bond.