A surety bond is a contract among at least three parties: the principal, the obligee and the surety. Through this agreement, the surety agrees to make the obligee whole if the principal defaults in its performance of its promise to the obligee.
Contract surety refers to bonds required of a contractor for construction. A contract bond generally provides a guarantee that a construction contractor will successfully complete a specified project according to the contract terms. Common contract bonds include: bid, performance, payment / labor / material, subdivision, maintenance, and supply.
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Court bonds fall into two categories: judicial and fiduciary. Typically, judicial bonds are required in litigation proceedings and are ordered by the court to protect either the plaintiff or defendant in a particular case. Fiduciary bonds require the appointed principal’s faithful performance and completion of duties such as managing, transferring and distributing assets and property in accordance with court orders for any person who is unable to manage his or her own affairs.
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License and Permit Bonds
License and permit bonds are required by municipalities, states or other government entities and require individuals or businesses to comply with the license or permit for which they have applied. These bonds guarantee that the principal will comply with the terms of the specific bond and hold the obligee against loss in the event of a violation of regulation and ordinances under which the license or permit is required.
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Any commercial bonds that are not clearly classified as license and permit or court fall under the miscellaneous category. Miscellaneous bonds can be required by municipalities, states, government entities, individuals, or various other entities. Bond forms and requirements are non-standard with diverse laws and ordinances.
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Learn how to become an HCC Surety agent.