Fidelity and Surety Bonds

Fidelity and Surety Bonds are required and issued for a wide variety of circumstances both personal and commercial. They are essentially a contract between two people or entities, and the bonding company. This contract basically says that one party will promise to do what the other party is requiring under penalty of a financial penalty, which the bond company agrees to pay should it come to that.

The most common example of the use of a bond that everyone recognizes from TV and movies, is a court bond whereby someone is arrested and bail is set for $10,000. That person can get out of jail by taking out a court bond, which means that for a small fee, the bonding company promises that you’ll appear in court or they forfeit the $10,000. The fee is usually a percentage of the bail in those cases which allows someone who doesn’t have $10,000 to get out of jail for a much smaller amount of money.

In the commercial world, bonds are used for a wide variety of purposes. The construction industry frequently uses several bonds such as contract bonds, payment bonds, maintenance bonds, and performance bonds. All of these are set up to guarantee the completion of a project and satisfactory payment of all subcontractors, frequently with some time tables attached to the requirements.

Quite a few industries use License bonds, which are set up protect you and your clients by ensuring that you will always perform quality and ethical work, with the bond there to pay out in the event that something happens. This ensures that the client gets financial recompense and your company isn’t writing a check for the entire amount of that recompense. This is what it generally means when you see that a company is “Licensed and Bonded”.

Individuals can also be bonded with a Fidelity Bond that insures against dishonesty, theft, fraudulent acts, and so forth. This is primarily used by professional services such as insurance, health care administrators, accountants, financial planners, and other fields where there is a lot of money and sensitive or personal information that they have access to. This bond would pay out to help the victim in the event that one of these key people were to use information in a way that was careless or criminal, that resulted in something like identity theft.

Last, bonds can be used when someone is making a private sale of property and instead of paying in full, they are making regular payments to the seller. The bond would be the guarantee that all of the money will be received. This is used frequently in for sale by owner situations with houses, cars, boats, and other tangible properties.

All of these types of bonds are purchased for a small percentage of the total amount that you take the bond out for, and are an easy and inexpensive way to ensure that everyone involved will live up to the terms of your agreement and guarantee that there is money available to repair the situation should something happen that one party does not live up to their end of the bargain.


This post was written by Aaron Nicklay, Agent with Farmer’s Insurance. If you would like more information on Fidelity and Surety Bonds, contact Aaron at or call (952) 229-5155.

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