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4 Main Types of Surety Bonds

by Evan Tarver

(Photo by Getty Images)



There are many different types of surety bonds. In fact, almost any contract or obligation can be bonded. However, the 4 most common types of surety bonds include contract surety bonds, commercial surety bonds, court surety bonds, and fidelity surety bonds. Each one of these financially protects an obligee across a range of potential scenarios.


1. Contract Surety Bond

A contract surety bond guarantees that a contractor will follow the specifications laid out in a construction contract. The obligee of a contract surety bond is a project owner and the bond ensures that the principal contractor will perform the work agreed upon and pay for the necessary subcontractors and materials and supplies.


2. Commercial Surety Bond

A commercial surety bond is typically used to protect public interests and is usually mandated by government agencies. These government agencies will require that all new businesses in a specific sector – such as the liquor industry – as well as all businesses with a license get a commercial surety bond. For these types of bonds, the obligee is the public.


3. Fidelity Surety Bond

A fidelity bond protects a company against the malpractice of an employee who handles cash and other valuable assets. Fidelity surety bonds typically protect against the loss of a customer’s money, equipment, or personal supplies. A fidelity surety bond can also protect your company from financial loss due to the fraudulent activity of an employee.


4. Court Surety Bond

A court surety bond can be required by an attorney or similar entity before a court proceeding to ensure protection from a possible loss. These court surety bonds typically guarantee the payment of costs associated with lawyer fees or appealing a previous court’s decision. Other court surety bonds protect an estate against malpractice of the estate’s administrator.

“The most common type of surety bond is a contract surety bond, typically for the construction of buildings or roads. Usually, two contract surety bonds are issued on a single construction project. One is used to ensure performance of the construction contract and the other is used to ensure the payment of suppliers and subcontractors. — Wendell Jones of Kentucky Surety & Construction Law

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