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4 Main Types of Surety Bonds

By Evan Tarver

4 Main Types of Surety Bonds
(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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