A relationship is a legal contract that involves three parties: (1) The bonded party (the client seeking the bond), also referred to as the Principal, (2) the obligee or the party that is requesting the bond from the client or the one who's the recipient of an obligation, and (3) the surety (insurance company), also referred to as Obligor who assures the obligee that the principal is able to do the task.
It is essential to realize that the bond is not an insurance policy. Bond pays for damages due to not meeting conditions, lack of 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 mentioned in the bond contract. As an example, these obligations could be completing a task on a certain date, performing certain tasks in accordance with 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 - and therefore the Obligee could follow either party or both party in the event of not satisfying the terms of the bond. bonds to invest in
There are hundreds types bonds. They include:
- Auto Dealer Bonds: A relationship 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 are bidding and the bid is awarded to those people.
- Broker Bonds: A relationship covering a wide variety of brokers, like insurance brokers, mortgage brokers, property brokers, etc.
- Cigarette Tax Bonds: A relationship required by the government from tobacco distributors, to make sure they will pay the taxes.
- Completion Bonds: A guarantee that the project is going to be completed on or before a certain date, regardless.
- Contractor License Bonds: Local and federal governments may request from certain contractors to possess contractor bond, in order for the governmental body to grant license for the contractor to use at a particular place.
- Customs Bonds. Required by the us government (US Customs) from importers.
- DME Bonds: Bonds required by the us government (Medicare) from the Distributor of Medical Equipments.
- Fidelity Bonds: Guarantee the lack of harmful or dishonest acts of certain individuals (employees, for example.)
- Freight Broker Bond (aka ICC Bond, or BMC-84) A relationship that the federal government body (FMCSA) requires from all transportation/ freight brokers to use - to guarantee delivery.
- Fuel Tax Bonds: A relationship to guarantee payment of truckers of fuel taxes sold in a particular area.
- Jail Bonds: Guarantee that the individual will get back to jail/court on/ before a particular 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 relationship to guarantee that the master of a liquor establishment will pay liquor taxes to the government.
- Lottery Bonds: A relationship that the establishments with state lotto machine are expected to possess to guarantee payments of lotto money to the state.
- Mortgage Banker/ Lender Bonds: Different as mortgage broker. This bond guarantees that the lending institution is going to adhere to their state laws linked to lending.
- Payment Bonds: Guarantee certain payments are created by way of a specific date.
- Payday Loan Bonds: Bonds that guarantees that payday lenders are operating per their 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 price of the band depends upon the amount of the bond, the credit of the Principal, and the type of the bond. As an 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 anyone with good credit, but may cost $1,500 (or even be not available) for anyone with bad credit. Insurance companies also compete among one another, so an attachment that costs $100 with a company may cost $50 with a different company.
