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Bonds

It is not unusual for businesses, especially contractors, to be required to put up a bond as a condition of securing a contract.  Bonds are carefully underwritten and usually require the client to provide detailed financial information.  I have access to competitive markets for the following types of bonds for those who qualify.

 
PERFORMANCE BOND:

Definition
A written guaranty  from a third party guarantor (usually a bank or an insurance company) submitted to a principal (client or customer) by a contractor on winning the bid. A performance bond ensures payment of a sum (not exceeding a stated maximum) of money in case the contractor fails in the full performance of the contract.

Performance bonds usually cover 100 percent of the contract price and replace the bid bonds on award of the contract. Unlike a fidelity bond, a performance bond is not an insurance policy and (if cashed by the principal) the payment amount is recovered by the guarantor from the contractor.

BID BOND:


Definition
A written guaranty from a third party guarantor (usually a bank or an insurance company) submitted to a principal (client or customer) by a contractor (bidder) with a bid.

A bid bond ensures that on acceptance of a bid by the customer the contractor will proceed with the contract and will replace the bid bond with a performance bond. Otherwise, the guarantor will pay the customer the difference between the contractor's bid and the next highest bidder. This difference is called liquidated damages, which cannot exceed the amount of the bid bond. Unlike a fidelity bond, a bid bond is not an insurance policy, and (if cashed by the principal) the payment amount is recovered by the guarantor from the contractor. Also called bid guaranty or bid surety.

FIDELITY BOND:


Definition
 
Type of insurance bought by an employer to protect against losses (such as embezzlement or theft by employees) that are not generally covered under normal theft or burglary policies. It may either be a blanket bond (applying to all employees) or for each employee on an individual basis. The insurance company may set certain guidelines to be followed in the insured firm's hiring practices, and the protection continues only so long as the duties of the covered employees remain the same (unless arranged otherwise). Some businesses such as brokerages, cash carriers, and security firms are required by law to obtain fidelity bonds. Also called fidelity guaranty or fidelity insurance.

PAYMENT BOND:


Definition
 
Deposit or guaranty (usually 20 percent of the bid amount) submitted by a successful bidder as a surety that (upon contract completion) all sums owed by it to its employees, suppliers, subcontractors, and others creditors, will be paid on time and in full. Also called contract payment bond.

These are the most common types of bonds, but there are others as well.  Contact me at 480.483.8897 to find out how our bonding services can be tailored to meet your specific needs.