What is a Surety Bond?
Put simply, a surety bond is a contract where a list of terms are laid out by one party for another to complete. A third-party then guarantees the completion of the terms by assigning its completion, or lack thereof, a financial value. At All American Insurance, the different types of bonds we offer all follow this same general outline. The only difference between the bonds is the specific type of action that is required for their completion.
A contract bond is a general type of bond and probably one of the most common types to be required and enforced. A large number of sub-bonds fall under this type of bond, as they are all centered around keeping a contractor bound to the conditions set forth by a contract. A few examples of contract bonds include bid bonds, performance bonds, and supply bonds.
In addition to a general contract, a subdivision bond guarantees that a developer will perform additional improvements to public land in accordance to government regulations. This is a useful negotiating tool that ensures that a developer performs an additional public good in exchange for access to valuable land.
Commercial bonds simply guarantee that a business has fulfilled additional non-bond obligations, such as acquiring specific licenses.
License bonds are similar to commercial bonds, except that they apply to individuals rather than entire businesses.
Aside from contract bonds, this is probably the bond type that people are most familiar with. With court bonds, a financier is essentially guaranteeing that an individual will show up to court on their assigned date.