You may be required, in the course of operating your business, to provide financial guarantees in the form of a bond. It might be for a bid bond, an executor's bond, a site improvement bond, a license bond or a performance bond. A bond is a promise made by an insurance company to satisfy an "obligee,"—a third party that is requiring this guarantee. When you purchase a bond, the insurance company is promising that it will provide that guarantee should you, the purchaser of the bond, not be able to deliver on what you have promised to the "obligee".
Bonds are generally described in the following broad categories: Fidelity Bonds, Surety Bonds, Commercial Bonds, License Bonds, Lost Instrument Bonds, as well as others. Some bonds are quite simple to secure with as little as a one page application. Other bonds, such as Surety Bonds, often require substantial financial information provided to the insurance company for approval and issuance of a bond.
There is more than one type of bond. Insurance bonds are normally three-party contracts in which one party agrees to guarantee the act, performance or behavior of a second party to a third party. Two common types of bonds are fidelity and surety.
An insurance policy that reimburses an employer for employee theft or embezzlement.
A written agreement wherein one party, called the surety, obligates itself to a second party, called the obligee or beneficiary, to answer for the default of a third party, called the principal.