The purpose of a surety bond is to provide security to a third party against any losses. These are usually required to ensure that the principal (the person/company/agency buying the bond) does not behave in any unethical manner or not hold up their obligations within a contract. There are many types of surety bonds, but four common types are:
Contract Surety Bonds: These are common in the construction industry. Contractors, subcontractors, or developers are required to get this bond, which protects the project owner if there is any issue with the completion of a project. Different types of contract bonds include site improvement bonds, bid bonds, supply bonds, payment bonds, subdivision bonds and performance bonds.
Fidelity Surety Bonds: This bond is required for companies that deal with large amounts of assets or cash. The bond protects the company and its customers from any theft by an employee. This includes ERISA bonds, employee dishonesty bonds, and janitorial bonds.
Commercial Surety Bonds: This bond is bought by licensed professionals and firms. The purpose of a commercial bond is to ensure that the licensed entity will comply with all rules and regulations.
Court Surety Bonds: Companies or individuals with a fiduciary dutyin a court proceeding are typically required to submit a court surety bond. These include court costs bonds, attachment bonds, and indemnity to sheriff bonds.