Bonds

Surety Bonds

Surety bonds are an agreement among three parties:

• The principal is the party that buys the surety bond.
• The obligee is a private or governmental party that requires the principal
  to secure a bond.
• The surety is the entity that underwrites the surety bond, such as an
  insurance company.

The obligee may file a claim against the bond if a principal doesn’t adhere to the surety bond’s terms. Then, if the situation cannot be remedied with the principal, the surety may provide financial compensation to the obligee. If that occurs, the surety will typically seek reimbursement from the principal for that payment.

Fidelity Bonds

Fidelity bonds are a type of business insurance that may financially protect against specific dishonest acts. Two kinds of fidelity bonds include the following:

• First-party fidelity bonds may cover acts of employee dishonesty
  (e.g., fraud, forgery or theft).
• Third-party fidelity bonds may provide coverage for dishonest acts by
  individuals working for your business on a contract basis.