Looking for a surety bond or fidelity bond but don’t know what it’s called? Don’t feel bad, there are more types of surety and fidelity bonds than there are flavors of ice cream. Let’s cover the basics...
First of all, understand that a surety bond is not an insurance policy. An insurance policy is a two party contract, between you and the insurance company. You pay a premium, the insurance company agrees to pay for losses covered in the contract.
The surety bond is different. It’s a three party contract between:
So in this case, the bond written by the surety, guarantees the performance of the principal, to the obligee.
If the principal fails to perform as promised, the obligee can recover losses from the surety. If the surety pays a claim to the obligee, the bond underwriters from the surety will expect to be reimbursed by the principal for any claims paid.
If you follow that three party relationship, where the first party (the surety), guarantees the performance of a second party (the principal), to a third party (the obligee), you begin to understand how it may be relatively easy, or extremely difficult to obtain a surety bond, depending on what the surety bond underwriter is being asked to guarantee.
That’s the basic concept. Now, why do you need a surety or fidelity bond?
At the risk of over simplification, realize that most bonds, regardless of what technical category they fall under, are trying to guarantee at least one of two things, and these things often overlap:
Given the fact that there are a bazillion rules, laws, standards and regulations imposed by federal, state and local government, that dictate how businesses and individuals and other entities interact with each other, you can imagine how many individual bond types there are.
At Bill White Insurance Agency, we write a variety of miscellaneous Surety Bonds, Fidelity Bonds, Court Bonds and Probate Bonds. Some of the most common and frequently requested surety and fidelity bonds we write are listed below.
Notary Bonds to satisfy requirements set by the Missouri Secretary of State. Cost $50 for a 4-year term, slightly more if you want a package that includes your notary log book and notary stamp. The bond includes $10,000 in Notary Errors & Omissions coverage.
License and Permit Bonds for city or county, including the City of Springfield MO or Joplin MO and other cities in Greene, Christian, Webster and other counties in southwest Missouri. Minimum cost $75 for a 1-year bond.
Employee Dishonesty Bonds for Janitorial Services or other Service-Oriented Businesses. Start at $100 per year for 5 or fewer employees.
ERISA – Fidelity Bond coverage for your employee benefit plan. The Employee Retirement Income Security Act of 1974 (ERISA) requires the fiduciary of an employee benefit plan be bonded. Minimum cost $100 per year for bond amounts under $250,000.
Lost Instrument Bond for lost securities (stock certificates, bonds, cashier’s checks). Minimum premium starts at $100 but this bond will require collateral.