There are two main categories of surety bond: Contract Bonds and Commercial Bonds. Contract bonds guarantee a specific contract. Examples include Performance Bonds, Bid Bonds, Supply bonds, Maintenance Bonds and Subdivision Bonds. Commercial Bonds guarantee per the terms of the bond form. A third type of bond sometimes classified as a "policy" that protects against theft is called a Fidelity Bond. Read on to learn more about common types of bonds.
A Performance Bond is a surety bond issued by an insurance company to guarantee satisfactory completion of a project by a Contractor. For example, a Contractor may be required to post a Performance Bond in favor of a client for whom the Contractor is constructing a building. If the Contractor fails to construct the building according to the specifications provided in the contract, the client is guaranteed compensation for monetary losses up to the amount of the Bond. The Surety will generally bring in a replacement Contractor to finish the project.
Payment Bonds are generally issued along with Performance Bonds to guarantee payment of Sub-Contractors and suppliers in accordance with a specific Bonded project.
A Bid Bond guarantees that a Contractor who is awarded a project on which he placed a bid will be able to post a Performance Bond as required and proceed with the project.
License and Permit Bonds are a general class of surety bond required of a person or entity to obtain a license or a permit in a city, county, or state. These bonds guarantee whatever the underlying state statute, law, municipal ordinance, or regulation requires. Some common examples of License Bonds are:
An Auto Dealer Bond, also called a Motor Vehicle Dealer Bond or MVD Bond, is a type of License Surety Bond. This bond is required of a Motor Vehicle Dealer to obtain their license to buy and sell autos for profit. In some states, Auto Dealer Bonds are also required of businesses that deal in motor vehicle parts, distribution and title, and registration work.
A Sales Tax Bond is a form of Financial Guarantee Surety Bond. This means that the Surety would be guaranteeing the principal's sales tax payments to the government. This type of surety bond may be required of any business that collects state sales tax along with payment for sold goods.
A Customs Bond is required by the Department of Homeland Security. It is a guarantee to the government that the importer will faithfully abide by all laws and regulations governing the importation of merchandise into the United States.
A Court Bond is a generic term for many types of surety bonds required by the Judicial system. Examples include:
A Fidelity Bond is a form of protection that covers policyholders for losses that they incur as a result of fraudulent acts by specified individuals. Typically, the fidelity policy insures a business for losses caused by the dishonest acts of the business's employees. There are many types of Fidelity Bonds available to different types of businesses.
Surety bonds exist to protect the public from businesses that might engage in unethical or illegal behavior. In industries where having a bond is a requirement of getting a business license, regulators have said there is a high risk of misbehavior. Not because these industries are associated with criminality; simply because they involve major business transactions, as in the case of an auto sale or a private school enrollment.
The types of claims that could potentially be filed against a bond will differ depending on the industry. Therefore, bond requirements vary widely across both industries and states. There are so many different types of surety bonds to ensure the public is protected while also avoiding putting an oversize burden on new businesses.
The process is simple. Start by reviewing the three parties involved in all types of surety bonds regardless of whether they're contract or commercial:
With most common types of surety bonds, the application process is relatively quick and easy. You and any other business owners may need to supply some basic personal and financial information. Approval is based on credit risk, but applicants with bad credit are often still able to obtain a surety bond. Once you have the bond, you need to provide proof to the relevant state agency through whatever method it prescribes.
The final cost depends on the type of bond, the size, and the credit risk of the applicant. Because there are so many variables involved, the cost of bonds can vary widely across applicants, industries, and states.
Although the total amount of bonds is large, the actual cost of the bond is relatively small. Costs are typically in the range of 1-5 percent of the total, so a $30,000 bond could cost less than $1,000. The cost is paid initially to obtain the bond, then again on a regular schedule – generally annually. Viking Bond Service can re-asses the risk of the bond every renewal period which can result in lower surety bond premiums for our clients if credit and/or financial standing has improved.
Viking Bond Service is your source for all types of surety bonds. Our application process is quick and easy, and our team is committed to getting you approved as quickly as possible. We are equally committed to helping all applicants - regardless of credit - get the legally-required surety bonds they need to begin building a successful business.
Learn the process of becoming bonded and insured. Find out how your company can obtain both.
Cyber liability coverage may be a necessary tool for modern times. Viking can get you covered.
If you need a Contractor License Bond Viking can help. The process is simple and easy. We provide great rates and fast service.
Avoid the cost and hassle of replacing a fraudulent surety bond. Learn how to check and verify your bond.
Viking can get your Freight Broker bond requirement satisfied quickly. Quotes and fast, FREE with no obligation.
Get the information you need to get your Auto Dealer Bond fast and easy from start to finish.
You may still be able to get approved despite challenged credit.
Need a Bond? Here's how to get one. Read here for information about the bonding process.
At times, a Utility Deposit Bond may be required by some public utilities to start service. Learn more and get a fast quote.