An Easy Guide to Surety Bond Terminology | Infographic

guide to surety bond terminology

Have you ever wondered about the differences between the various technical terms used in the surety bond industry? Here is our easy guide to surety bond terminology so you can understand the ins and outs of what’s being said. 

A guide to surety bond terminology

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Administrator: Person with the legal right to manage an estate of a decedent or the affairs of a company


Alcohol bond (liquor tax bond): Guarantees that sellers of alcohol will pay all fees and taxes for the manufacturing, sale, or storage of alcoholic beverages


Applications: Written form completed by a bond applicant which collects information to underwrite a bond


Attachment: Legal seizure of property in dispute


Auto dealer bond: Required in most states to own a car dealership


Balance sheet: Financial statement listing assets, liabilities, and net worth


Bank depository bonds: Guarantee deposit of public funds


Bankruptcy trustee bonds: Guarantee that bonded trustees will perform duties according to court rulings on behalf of beneficiaries


Bid bonds: Guarantee contractors submit bonds in good faith and enter into contracts at bidded amounts


Blanket bonds: Guarantee honesty of employees


Blanket public official bonds: Guarantee honesty of public employees


Bond form: Legal document that states the purpose, penalty, term, and conditions of the bond, and specifies the parties to the agreement


Bond penalty: Amount surety is liable for


Cancellation clause: Allows a surety to cancel future liability


Capacity: Maximum amount of bond a surety can write, found in federal treasury listing


Collateral: Valuables or money used to mitigate the risk to a surety


Commercial bonds: Required by businesses (not contractors) to guarantee completion of service


Conservator: Designated person, official, or entity who protects the interests of an incompetent or minor


Contract bonds: Guarantees the performance of contractual obligations according to its terms


Court bonds: Required in some legal cases


Damages: Compensation sought via claim


Default: Violation of a surety bond’s terms due to failure to perform


Errors and omissions insurance: Covers damages from mistakes and negligence


Executor: Person appointed to execute will


Fidelity bonds: Guarantee employee honesty


Fiduciary: Court-appointed person or entity who handles someone’s affairs


Fiduciary bond (probate bond): Guarantees ethical behavior by fiduciaries


Freight broker bond: Pre-licensing requirement for freight brokers


Indemnity agreement: Promise to repay surety


License and permit bonds: Required to obtain a license or permit to safeguard the public


Maintenance bonds: Protect against poor workmanship or defective materials


Miller Act (1935): Requires contractors on federal projects to obtain a performance bond and a payment bond; “Little Miller Acts” are similar state-level requirements


Notary public bonds: Protect the public against losses from improper actions of a notary public


Obligee: The beneficiary of the bond or party a bond protects from loss


Payment bonds: Guarantee payment, usually from contractors to sub-contractors and suppliers


Performance bonds: Guarantee performance of a contract according to its terms


Premium: Amount paid for a bond


Principal: Person or entity whose obligations a bond guarantees


Reclamation bond: Guarantees an entity will restore land that it has mined or altered to its original condition


Sales tax bond: Guarantees businesses will pay any outstanding taxes and file tax information when due


Supply bond: Covers supplier contract


Surety: Person or entity who is legally responsible for contracts, delinquency, debt, or liability of others


Surety bond: Three-party agreement between principal, obligee, and surety which guarantees the principal will keep their contractual obligations to the obligee


Trustee: Person or entity appointed to manage affairs of a company including assets and debts


Underwriting: Investigation process of qualifying for a bond