Glossary of Surety Terms
The largest amount of insurance available from a company or the market in general.
Court Bond
A general term referring to bonds required by a court of law.
Financial Guarantee Bond
Obligates the surety to pay a certain amount of money if the principal does not perform.
The agreement when one party assumes financial responsibility for the liability of another party. Hold-harmless agreements are typically used to impose this transfer of risk.
License & Permit Bond
Required by a municipality or other public body as a condition to granting a license or permit to engage in a specified activity, this bond guarantees that the party seeking the license or permit will comply with applicable laws or regulations.
Maintenance Bond
A type of construction bond that guarantees against defective materials or craftsmanship. This bond is good for a specified amount of time after the finished work has been accepted.
Miscellaneous Bond
Bonds that do not fit any of the other well-recognized categories of surety bonds.
A person or organization to whom another party owes an obligation. In a bonding situation, this party requires and receives the protection of the bond. For example, under a performance bond, the obligee is the project owner for whom the bonded contractor is required to perform the specified work.
Payment Bond
Bonds posted by contractors to guarantee that the project’s subcontractors and material suppliers will be compensated for their work. They are often required in conjunction with performance bonds.
Performance Bond
Guarantees that the contractor will perform the work in accordance with the construction contract and related documents, thus protecting the owner from financial loss up to the bond limit (called the penal sum) in the event the contractor fails to fulfill its contractual obligations.
The amount of money an insurer charges to provide the coverage described in the policy or bond.
Reclamation Bond
Guarantees that an institution will restore land that it has mined or otherwise altered to its original condition.
Supply Bond
Guarantees performance of a contract to furnish supplies or materials. In the event of a default by the supplier, the surety indemnifies the purchaser of the supplies against the resulting loss.
Treasury Listing
A financial rating published by the federal government that lists the maximum size of the federal bond a surety is allowed to write.
Workers Compensation Self-Insurers Bond
State and federal workers compensation laws require employers to compensate employees injured on the job. An employer may comply with these laws by purchasing insurance or self-insuring by posting a workers compensation bond to guarantee payment of benefits to employees.