Bonded insurance–also called surety bonds–are issued out as financial protection against a contractor working on a project for a client. These projects are usually related to construction, such as the construction of a commercial building or a highway renovation. Bonded insurance is usually paid for by the construction company as part of the deal with the client. This ensures that if the contractor fails to complete the job for any reason, the client doesn’t lose money on the deal and can hire a new contractor to complete the project. There are several different types of bonded insurance from which to choose.
License Bonds
License bonds are a type of bonded insurance required by any person or business in order to obtain a license or permit according to local law. This law is regulated at the city, county or state level and guarantees that the specifics of the law are followed by the entity doing work. The bonded insurance is used so that in the event of a failure to follow proper codes, payment is extracted by the local government to cover this problem.
Performance Bonds
Performance bonds are surety bonds provided by insurance companies. They are purchased to help guarantee a contractor’s completion of a project and are ideal for high-cost, large-scale jobs such as major construction. With performance bonds, a contractor pays for bonded insurance for the client, helping to guarantee compensation and prevent monetary loss due to a failure by the constructor to complete the job. Performance bonds are often required by clients of massive projects for which multiple contractors put forward bids for the job.
Court Bonds
Court bonds is a broad term used to describe any type of bonded insurance required by the court system. This type of surety bond protects the court financially in exchange for providing certain privileges to individuals or companies. When an individual is out of jail pending the results of his jail sentence, for example, he is usually out on bond.
Fidelity Bonds
Fidelity bonds protect policyholders for businesses in the event of financial damage cause by dishonest or fraudulent activity. This helps protects investments from some extreme risks that can cost investors large chunks of their portfolio’s value.
Customs Bonds
Customs bonds are often required by the Department of Homeland Security to businesses that are importing products into the United States. This bonded insurance is a financial agreement by the importing company to follow all laws and regulations of the United States regarding their product.
