Bonding in Insurance

insuranceBonding is a method of protecting the government, individuals or companies against loss through the dishonesty of others or the failure of others to fulfill certain contracts or obligations. Such bonds are issued by surety companies and insurance companies. Types of bonds include fidelity bonds, surety bonds, bail bonds, and appeal bonds.

Fidelity bonds are obtained by many employers for employees who handle money or property. If the employee steals money or commits a dishonest act which causes financial loss to the employer, the bonding company must pay the loss as provided by the terms of the bond. The company which issues the bond usually investigates the employee to make sure that he or she has a record of honesty. Fidelity bonds make up a large class of the bonds written in the United States. Blanket fidelity bonds are sold to banks and other financial institutions to protect them against such losses as theft, forgery, and robbery. Types of blanket bonds are also available for other public and commercial enterprises.

Surety bonds guarantee performance or obligations that are authorized by law. There are many types of surety bonds. For example, performance bonds guarantee that contractors will perform jobs properly and on time. Public official bonds may be required of people holding government positions. They provide surety for people responsible for public money, and guarantee, in effect, that the official will carry out the prescribed duties. Fiduciary bonds guarantee the performance of people who are appointed by a court to be responsible for another’s property. Such people include executors of wills, administrators of trusts, and guardians.

A bail bond is usually required of an arrested person who is permitted to go free until his or her trial is heard in court. If the person fails to appear for trial, the bond is forfeited to the court. An appeal bond is required of the defendant in a court case to insure that the judgment (award) of the lower court will be paid if affirmed by the higher court in review.