A bond is a legal agreement between three parties: (1) the bonded party (the client seeking the bond), also known as the Principal, (2) the obligee or the party demanding the bond from the client, also known as the Obligor, and (3) the surety (insurance company), also known as the Obligor, who guarantees the obligee that the principal will perform the mission. Learn more by visiting https://swiftbonds.com/license-permit-bonds/.
It is important to recognise that the bond is not an insurance policy. Damages suffered as a result of failure to satisfy terms, lack of completion, fraudulent conduct, and so on are protected by the bond. Damages incurred as a result of an accident are covered by insurance.
A surety bond, for example, ensures that the bond’s Principal can fulfil the “obligations” outlined in the bond contract. These obligations could include, for example, completing a project by a certain date, performing certain tasks in compliance with village codes, and so on. The bond becomes “void” until the Principal has fulfilled the conditions. In most cases, the bond language holds both the Principal and the Surety jointly and firmly responsible for meeting the bond’s terms, implying that the Obligee will pursue one or both parties if the bond’s terms are not met.
Bonds come in a range of shapes and sizes. They are as follows:
- Auto Dealer Bonds: For new projects in the used car dealership, many states need a bond.
- Bid Bonds: Promise that such individuals will sign contracts when bidding and that the bid will be awarded to those individuals.
- Broker Bonds: A bond that protects a variety of brokers, such as insurance brokers, mortgage brokers, real estate brokers, and so on.
- Cigarette Tax Bonds: The government allows tobacco manufacturers to post a pledge to ensure that they can pay their taxes.
- Completion Bonds: A promise that a project will be done on or before a certain date, regardless of the circumstances.
- Contractor License Bonds: Local and federal governments may require a contractor bond from some contractors in order for the governing body to issue the contractor a licence to operate in a specific location.
- Bonds for Customs. Importers are required by the federal government (US Customs).
- DME Bonds: The federal government (Medicare) allows the Distributor of Medical Equipments to post a bond.
- Fidelity Bonds: Ensure that such people do not engage in negative or deceptive conduct (employees, for example.)
- Bond for Freight Brokers (aka ICC Bond, or BMC-84) A bond required by the Federal Motor Carrier Safety Administration (FMCSA) for all transportation/freight brokers to operate in order to ensure delivery.
- Fuel Tax Bonds: A bond that guarantees truckers’ payment of fuel taxes collected in a specific region. Jail bonds ensure that a person can return to jail/court on or before a certain date.
- Bonds for licences and permits: It’s a bond group, not a bond type. Contractor bonds, car dealers, brokers, and other types of bonds fall under this group.
- Liquor Tax Bonds: A bond securing the payment of liquor taxes to the government by the owner of a liquor establishment.
- Lottery Bonds: A bond that is expected by institutions that have a state lotto machine to guarantee payment of lottery money to the state.
- Bonds issued by mortgage bankers/lenders are not the same as those issued by mortgage brokers. This bond ensures that the lending institution will follow all applicable state lending laws.