A bond is a legal contract that involves three parties: (1) The bonded party (the client seeking the bond), also called the Principal, (2) the obligee or the party that's requesting the bond from the client or the one who's the recipient of an obligation, and (3) the surety (insurance company), also called Obligor who assures the obligee that the principal may do the task.
It is very important to realize that the bond is no insurance policy. Bond pays for damages due not to meeting conditions, not enough completion, a dishonest behavior, etc. Insurance pays for damages due to an accident.
A surety bond, for instance, is a guarantee that the Principal in the bond, will perform the "obligations" as stated in the bond contract. For example, these obligations may be completing a project on a specific date, performing certain tasks according to village codes, etc. When the Principal has met the conditions, the bond becomes "void" ;.The language of the bond normally holds both the Principal and the Surety the responsibility to meet the terms of the bonds, jointly and severely - meaning that the Obligee could go after either party or both party in the event of not satisfying the terms of the bond. invest bonds UK
You can find hundreds types bonds. They include:
- Auto Dealer Bonds: A bond required by many states for new ventures in the used car dealership.
- Bid Bonds: Provide guarantees that certain individuals will sign the contracts when they're bidding and the bid is awarded to those people.
- Broker Bonds: A bond covering a wide variety of brokers, like insurance brokers, mortgage brokers, real-estate brokers, etc.
- Cigarette Tax Bonds: A bond required by the federal government from tobacco distributors, to ensure they'll pay the taxes.
- Completion Bonds: A guarantee that a project is likely to be completed on or before a specific date, regardless.
- Contractor License Bonds: Local and federal governments may request from certain contractors to possess contractor bond, for the governmental body to grant license for the contractor to work at a certain place.
- Customs Bonds. Required by the federal government (US Customs) from importers.
- DME Bonds: Bonds required by the federal government (Medicare) from the Distributor of Medical Equipments.
- Fidelity Bonds: Guarantee having less harmful or dishonest acts of certain individuals (employees, for example.)
- Freight Broker Bond (aka ICC Bond, or BMC-84) A bond that a federal government body (FMCSA) requires from all transportation/ freight brokers to work - to guarantee delivery.
- Fuel Tax Bonds: A bond to guarantee payment of truckers of fuel taxes sold in a certain area.
- Jail Bonds: Guarantee that an individual will come back to jail/court on/ before a certain date.
- License and Permit Bonds: A class of bonds, not really a type. This category includes contractors bonds, auto dealers, brokers, and other types.
- Liquor Tax Bonds: A bond to guarantee that who owns a liquor establishment will probably pay liquor taxes to the government.
- Lottery Bonds: A bond that the establishments with state lotto machine are required to possess to guarantee payments of lotto money to the state.
- Mortgage Banker/ Lender Bonds: Not similar as mortgage broker. This bond guarantees that the lending institution will stick to the state laws related to lending.
- Payment Bonds: Guarantee certain payments are manufactured by way of a specific date.
- Payday Loan Bonds: Bonds that guarantees that payday lenders are operating per the state laws and rules.
- Sales Tax Bonds: A Bond that guarantees the payment of sales tax to the government.
- Title Agency Bonds: Required by many local governments to guarantee the title agents.
- Utility Bonds: Used to guarantees the payment of the utility bills in timely manner.
Cost of bonds
The cost of the band is dependent upon the amount of the bond, the credit of the Principal, and the kind of the bond. For example a $10,000 contractor bond is less than the usual $50,000 similar bond. Some bonds require strict credit and financial underwriting. A $20,000 used car dealer bond could sell for less than $200 for someone with good credit, but may cost $1,500 (or even be not available) for someone with bad credit. Insurance companies also compete among each other, so an attachment that costs $100 with an organization may cost $50 with an alternative company.
