What Is a Commercial Surety Bond?
Commercial surety bonds, sometimes referred to as business bonds, ensure that the public is protected from financial loss or damage due to non-compliance, wrongdoing, or misconduct. As with all surety bonds, commercial bonds are a three-way promise between you (the principal), Westfield (the surety), and the party requesting the bond (the obligee). The surety guarantees the obligee that the principal will fulfill its obligations as required.
What Is the Difference Between Commercial and Contract Bonds?
The big difference between these two types of surety bonds is the intended purpose. Contract bonds provide a financial guarantee for contracts used in the construction industry, such as project bids and supply agreements. They are often required when working with regional and local governments. In contrast, commercial bonds can be found in almost any industry and cover everything from a company seeking a working license to individuals involved in court proceedings.
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Types of Commercial Bonds
Now that you know what a commercial bond is, let’s take a deeper dive into the types of commercial bonds your business may need. While there is a large spectrum of bonds out there, here are some of the most common ones.
Court Bond:
The court often requires either the plaintiff or defendant to post a court bond. These bonds are used to demonstrate financial responsibility to the court while the case is being heard.
Examples:
- Appeal bond
- Attachment bond
- Replevin bond
- Release of lien bond
Probate or Fiduciary Bond:
These bonds guarantee the good faith of a person appointed to handle another person’s private affairs.
Examples:
- Administrator bond
- Executor bond
- Guardian bond
- Trustee bond
License and Permit Bond:
Often required by municipalities, state departments, or the federal government, these bonds guarantee consumer protection before granting licenses to businesses such as electricians, plumbers, and car dealerships.
Examples:
- Contractors’ license bond
- Motor vehicle bond
- Lost or defective title bond
- Mortgage bond
Miscellaneous Bond:
Failing to fall into one of the previous classifications, a miscellaneous bond is another type of financial guarantee. It protects consumers from certain forms of breached agreements or contracts.
Examples:
- Wage & Welfare Bond
- Utility Deposit Bond
- DMEPOS Bond
- Lost Instrument Bond
