Insurance bonds are the surety given to a bond holder by the other party to ensure that the bond holder will be paid their money back in any case of failure in meeting the requirements of the first party. There are different types of insurance bonds.
LICENSE PERMIT INSURANCE BOND
License permit insurance bonds are the types of insurance bonds that are required by an obligee for obtaining a license from a local body for working under their jurisdiction.
Motor vehicles insurance bonds, money transmitter bonds etc. are the examples of license permit insurance bonds.
These are the types of insurance bonds that are concerned with court matters and are described as per the legal regulations or statutes set by a legal body. Court bonds are classified into two types and are called as judicial and fiduciary types of insurance bonds.
Judicial bonds are the types of insurance bonds concerned with parties who seek the court’s interference in settling their matters. The parties who need to defend themselves from similar legal actions filed against them in the courts also require such bonds.
Fiduciary bonds are the types of insurance bonds guaranteed to the concerned parties by the court that their properties, which are under court’s supervision, will be taken care.
PUBLIC OFFICIAL BONDS
Public official bonds are the types of insurance bonds that are guaranteed to ensure that elected bodies or people will perform their duties and complete the responsibilities faithfully. The bond amount is decided by the statues or concerned judicial bodies. Examples for these types are notaries, judges, tax collectors etc.
However, it is not necessary that all public entities should have public official bonds.
MISCELLANEOUS INSURANCE BONDS
Miscellaneous insurance bonds are meant for the matters that do not fall under any other category but requiring insurance security. This is quite a generalized type and includes insurance bonds made on instrument security, utility payment, wages payment etc.
Miscellaneous types of insurance bonds require more extensive research and underwriting since these types of bonds give monetary guarantee to the obligee. The risks and various possibilities are to be taken into account before deciding on such insurance bonds. Apart from these, miscellaneous insurance bonds also require more supporting details such as signature.
CONTRACT PERFORMANCE BONDS
Contract performance insurance bonds are the guarantees made to ensure the performance of a task undertaken by the party. In any case of incompletion of the task as mentioned in the contract or if the task completed failed in anyway, the party has to pay back the bond amount that is mentioned in the contract and any expenditure caused to them during the process of attempting to complete the task will not be considered and the party will be at huge lose.
Contract performance bonds are supposed to be done in such a way that extensive underwriting is done so that no loopholes are left in any way that can deny the compensation and it also helps in ensuring that the task is performed as required by the client.