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A bond is a contractual guarantee by a third-party that something will happen. There are two general categories of bonds - fidelity and surety.

A fidelity bond protects employers from employee theft by guaranteeing the employers money and property when an employee or someone entrusted by the company causes damage through careless or dishonest action. Typically, insurance companies and security firms are required to obtain a fidelity bond. Some types of fidelity bonds are blanket position bonds, named schedule bonds, financial institution bonds, etc.

A surety bond is a three party guarantee put into place to protect the party requesting the bond and guarantees the performance, ability, honesty and integrity of individuals performing various responsibilities and obligations. The three parties involved are the obligee, principal and surety. However, there can be another party to a suretyship called an indemnitor.


Indemnitor: An indemnitor may come into play when the Principal has the capabilities to perform the obligation, but is lacking the financial resources to carry it through to completion. The indemnitor may put up cash, other liquid assets, certificates of deposit (CD’S), etc. to entice the surety to issue the bond to the principal.

Managing General Agents: A person or firm authorized by an insurance company to transact insurance business on its behalf. They have authority to bind coverage, issue policies, appoint agents, adjust claims and provide administrative support.

Obligee: The party requiring the bond which receives the guarantee the principal will perform.

Principal: The party required to get the bond and to perform and fulfill a contract or to meet an obligation.

Surety: The one who guarantees the performance of the principal to the obligee (most commonly, the bonding company).

Types of Bonds

Commercial Bonds: The vast majority of bonds falls under the license and permit surety bond type. This includes businesses such as Auto Dealers, Collection Agencies, Mortgage Brokers and Telemarketers. These bonds are used to guarantee that the individuals or businesses abide by the rules and regulations of their business license.

Contract Bonds: Typically used for construction work, these bonds guarantee that the job will be completed as per the terms of the contract and are normally required by law on construction work for public bodies (state, county, cities, etc.). Some examples of contract bonds are:

  • Bid Bond: This form of bond is required to accompany a bid for a contract which will require that the successful bidder furnish further bond if awarded the job. The guarantee is that if the bid is accepted, the bidder will enter into the contract and will satisfy further bonding requirements for the job. If the obligee awards the contract and the bidder refuses to perform the work or furnish required bond, the bid bond guarantees to the obligee payment for the difference between the amount of that bid and the bid of another which is accepted. The bid bond is provided by the surety that will ultimately furnish the additionally required bond. Thus, the surety underwrites the bid bond based on the concept that it will eventually have to “bond the job.”

  • Maintenance Bond: This bond provides for the contractor, once the job has been completed and accepted, to make corrections for any faulty work or replace defective materials. This may be included as part of the performance and payment bond.

  • Payment Bond: The bond guarantees that all labor and materials for the project will be paid by the contractor upon completion of the work. A payment bond is generally required when a performance bond is needed and they frequently are combined as a single bond.

  • Performance Bond: A performance bond replaces a bid bond once the contract has been awarded. It guarantees the financial and physical ability of the entity receiving the contract to complete the job or service for which the bid was awarded.

  • Subdivision Bond: This bond may be required by a permitting authority (city, state, county, etc.) to guarantee that promised streets, sidewalks, sewers, streetlights and other required improvements will be installed in the subdivision. The person who would normally be required to provide this bond to the permitted authority would be the developer of the property.

  • Supply Bond: Someone purchasing goods from another may require a supply contract bond which guarantees delivery at an agreed upon price. This would be important to a contractor who is using this agreed upon price to bid a job.

Court Bonds: Bonds are frequently required by courts in various forms of litigation. These bonds are commonly referred to as “judicial bonds”. There are two general types of judicial bonds - fiduciary and court.

Some examples of court bonds are:

  • One seeking a writ of attachment against another to prevent that person from disposing of the property in question;

  • One seeking an injunction to restrain a person from doing a certain thing;

  • One who has the property of another seized.

Fiduciary Bond: This type of bond guarantees the performance of a person appointed by a court, or named in a will or deed of trust to take possession of property, collect assets, make investments, pay debts, sell assets, carry on a business, distribute property to heirs, or any combination of these and related tasks. The guarantee is that the person will perform such tasks honestly and faithfully, and rectify any deficiencies found in the performance.

These bonds are controlled very strictly by the court. The court will require the principal under the bond to provide reports to the court. The larger the assets or the money involved, the more frequent the court may ask for reports. Some examples of fiduciary bonds are:

  • Probate Bond: This type of bond is designed for those who administer estates of deceased persons. Such persons are required to collect the assets, file an inventory, give notice to creditors, pay the debts in proper order, distribute the balance to those entitled under the law, and account to the court.

  • Administrator/Administratrix Bonds: An Administrator/Administratrix Bond is a surety bond. It guarantees performance, honesty, and conduct of an administrator/administratrix. This type of bond is normally purchased to provide protection of a minor, the administrator/administratrix of a will or estate, or the trustee of an estate or trust. The bond guarantees that the administrator/administratrix will perform the duties for which he or she is responsible. These bonds are normally filed and overseen by the court or possibly another governmental entity. Note: The administrator is male and the administratrix is female.

Tips To Consider

Verify before you buy!!!! Contact us to verify the license of the agent and the insurance company before you sign a contract for coverage.

Research complaints involving the insurance company through the Division of Consumer Services at www.MyFloridaCFO.com or by calling 850-413-3089 or 877-693-5236.

Read your contract carefully! Contracts differ between insurance companies so you must review your own contract.

Keep a copy of your important documents in a second location! In the event your property is totally destroyed, you would have copies of all your important documents.

Contact Us or File a Complaint

Should you need additional information, you may speak with an insurance specialist between the hours of 8am–5:00pm at one of the telephone numbers listed below:

1-877-MY-FL-CFO (1-877-693-5236)

Out of State Callers: (850) 413-3089

You can also contact us for assistance anytime by email at Consumer.Services@MyFloridaCFO.com. or file a complaint through our "Consumer Help Online” website.