Surety bonds are essentially a guarantee that the principal will perform their job as detailed in the contract. If a person or business hires a bonded contractor and the work does not get done as promised, the company that issued the bond is responsible for the resulting financial losses. There are many types of surety bonds available for a variety of professions and circumstances. Here are three of the most common types of bonds.
Performance bond: This simply guarantees that if a contractor doesn’t perform, the client can receive compensation for monetary loss and a replacement contractor to finish the project.
Payment bond: Generally issued with performance bonds, this guarantees payment of sub-contractors and suppliers for the bonded project.
Bid bond: This guarantees that the bonded contractor who is awarded the project on which he placed a bid will post a performance bond and get to work on the project.
License bond: This guarantees that the bonded person or business will obtain a license or permit to meet any necessary city, county or state laws and requirements.
Auto dealer bond: This guarantees that a motor vehicle dealer is licensed and legal to sell vehicles for profit.
Sales tax bond: This guarantees that the bonded business will distribute collected sales tax to the state government.
This guarantees protection from fraudulent and/or dishonest employees, including theft and embezzlement.