Bond Types to be Aware of in the USA
Bond types can vary greatly from the business to business. Unfortunately many of them are also quite complicated, so in order to ensure that your business has the right coverage the following is a list of the most common/important bond types:
- Performance and Payment bond
A performance and payment bond types are necessary for most big construction contracts, including all state projects in the US. The performance and payment bond ensures the party issuing the contract that they cannot suffer any financial loss as a result of the contractors failure to complete the work (usually for reasons of bankruptcy). It also ensures that the contractor will personally pay for all services and materials necessary for the realization of the project.
2. Fidelity Bond
A fidelity bond protects your business in the event of any employee dishonesty. Small/family companies may not require fidelity bonds for all their employees but it is always a good idea to have fidelity bonds for employees who have a lot of responsibility for example accountants/security guards, etc. Large companies where it is difficult to get to all your employees definitely require fidelity bonds.
3. Loss Instrument Bond
If your company requires you to reissue valuable assets such as promissory notes, you definitely need a loss instrument bond. The bond protects your business against abuse of asset reissuance. For example if an employee/client claims to have lost an asset but really wants the reissue to commit fraud.
4. License Bond
This one is for businesses that require specific licenses, for example a tavern or liquor store. If some issue involving abuse of the license occurs, the license bond might protect your business. For example if you have a license to server food but negligence causes a customer to become ill.
Read more about this Article in: Performance
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