A surety bond IS NOT an insurance policy. A surety bond is a guarantee, in which the surety guarantees that the contractor (or an individual in some cases) called the “principal” in the bond, will perform the “obligation” stated in the bond. For example, the “obligation” stated in a bid bond is that the principal will honor its bid; the “obligation” in a performance bond is that the principal will complete the project; and the “obligation” in a payment bond is that the principal will properly pay subcontractors and suppliers. Bonds frequently state, as a “condition,” that if the principal fully performs the stated obligation, then the bond is void; otherwise the bond remains in full force and effect. If the principal fails to perform the obligation stated in the bond, both the principal and the surety are liable on the bond, and their liability is “joint and several.” That is, either the principal or surety or both may be sued on the bond, and the entire liability may be collected from either the principal or the surety. The amount in which a bond is issued is the “penal sum,” or the “penalty amount,” of the bond. Except in a very limited set of circumstances, the penal sum or penalty amount is the upward limit of liability on the bond. The person or firm to whom the principal and surety owe their obligation is called the “obligee.” On bid bonds, performance bonds, and payment bonds, the obligee is usually the owner. Where a subcontractor furnishes a bond, however, the obligee may be the owner or the general contractor or both. The people or firms who are entitled to sue on a bond , sometimes called “beneficiaries” of the bond, are usually defined in the language of the bond or in those state and federal statutes that require bonds on public projects. To obtain a Surety Bond quote, please click here.
Types of Surety Bonds
How to obtain a Surety Bond
Fidelity Bond A Fidelity Bond is a form of business insurance. It is usually purchased to protect employers from any loss of money or property incurred as a result employee theft. The bond is essentially an insurance policy that protects an employer against employee theft, larceny, or embezzlement committed by a covered employee. A covered employee or theft is dependent upon the specific terms of the bond or policy terms.
Janitorial Bonds Janitorial Bonds – sometimes called housecleaning bonds, are a type of fidelity bond that is designed to protect a third party, your customer in this case. While their property is being worked on by your employees, their personal belongings need to be safeguarded against theft, and that is what a janitorial bond does for your company. Since it is voluntary, you may want to market this to your prospective customers. Since the janitorial bond does not cover damage, a good General Liability insurance policy is a good idea. There are a lot of consumers and companies who may insist that the service they hire have a cleaning service/janitorial bond in place to protect them against theft.