Bonds
A Surety Bond is a written promise from a surety company to another party requiring the bond who is the obligee, that a third party will fulfill the obligee’s requirements. The surety company stands jointly and severally with the person/company needing the bond for a specified bond amount required by the obligee. Suretyship is not insurance.
Want to go deeper?
BONDS
There are many types of bonds offered by the surety market. They are separated into two primary categories—Contract and Non-contract. The Contract bonds (including bid, contract and payment bonds) are used when a contractual obligation is made regarding specific contracts. The non-contract bonds (including license, permit, and judicial bonds) relate to obligations and performances that must be met but are not due to a contract.
(Refer to ACORD 501) (Refer to PF&M Section 242.1)
Bonds—Bid Bonds
The bid process can be a long one. When it is complete the customer expects the contractor or supplier to deliver as promised. Many times a bid bond is required that obligates the surety to honor the bid bond by either issuing a contract bond if the contractor or supplier receives the contract or pay a penalty that will offset the cost of reopening the bid process.
Automotive operations may enter into contracts with governments for services and supplies when a bond is required.
(Refer to ACORD 501) (Refer to PF&M Section 242.6-2)
Bonds—Contract Bonds
Contracts are a way of doing business. One way to guarantee that a contract is performed is to require that a bond be posted for its successful performance. The bond provides a level of security beyond the signature on the contract. The purchaser of the services is assured that either the contract will be carried out or a Surety will compensate him.
Automotive operations may enter into contracts with governments for services and supplies when a bond is required.
(Refer to ACORD 501) (Refer to PF&M Section 242.6-2)
Bonds—License Bonds
Most municipalities and states require license bonds of many types of business in order to obtain permits or licenses. This coverage is available using Surety Association forms.
(Refer to ACORD 501) (Refer to PF&M Section 243.6-1)