A general classification of bonds that refers to all bonds other than contract and performance bonds. Commercial bonds cover obligations typically required by law or regulation. Each bond is unique to the circumstances at hand.
Included within the Commercial Bond category are:
License and Permit Bonds
A term used to refer to bonds, which are required to obtain a license or a permit in any city, county, or state. These bonds guarantee whatever the underlying statute, state law, municipal ordinance, or regulation requires. They may be required for a number of reasons, for example the payment of certain taxes and fees and providing consumer protection as a condition to granting licenses related to selling real estate or motor vehicles and contracting services.
Some bond types included with License and Permit Bonds:*
BLUE SKY BOND (Securities Dealer or Securities Broker)
The bond guarantees compliance with state statutes and indemnifies the purchasers of securities against loss due to false representations made by the dealer or any of the salespeople as an inducement to purchase securities.
COLLECTION AGENCY BOND
This bond guarantees that the Principal will operate according to state statutes and the Fair Credit Reporting Act regarding this type of business and the proper remittance of funds collected by the Principal on behalf of any customers.
COMPLIANCE GUARANTEE LICENSE BONDS
(Plumbers, Electrician, Building Contractors, HVAC, etc)
These bonds are usually required by a governmental entity and guarantee that the Principal will conduct business in accordance with the privilege granted by a particular license and he/she will comply with the governmental ordinances. Ultimately, these bonds protect the public from incompetency and hold the governmental entity harmless.
GRAIN WAREHOUSE BOND (State Grain Storage and Grain Buyers/Dealers, Federal Grain Storage/Buyers Bond)
The Storage Bond is a Faithful Performance/Financial Guarantee obligation guaranteeing the type, grade, and net quantity of grain called for by a farmer's storage receipt will be in the elevator when the farmer decides to sell it. Bond penalty varies by state and is based on bushel capacity of the warehouse. The Buyer/Dealers Bond guarantees payment by buyer/dealer to the seller of grain.
ICC BROKERS BOND (Transportation Broker)
The ICC Broker is a person who arranges the transportation of merchandise by Common Carrier for a Shipper. The bond guarantees that the Carrier and the Shipper will receive goods and all monies due to them.
LICENSE BOND (FINANCIAL GUARANTEE)
This type of bond guarantees payment of a sum of money required of the Principal in connection with his line of business pursuant to the license granted him/her.
LICENSE PERMIT BONDS (Blasting, Demolition, Encroachment, Fumigation, Highway Access, House Movers, Oversize/Overweight, Right of Way, Sidewalk or Street Opening or Obstruction, Weigh master)
These bonds guarantee compliance with requirements and restrictions pursuant to a license granted and also protects the general public against monetary loss, physical damage or bodily harm. The bond is required for a specific activity the Principal wishes to engage in and usually holds the Obligee harmless.
MORTGAGE BROKER BOND (Loan Broker)
These bonds run to the State for the benefit of any person injured by wrongful acts, default, fraud or misrepresentation of the Principal. It guarantees the Principal will faithfully perform mortgage commitments made and account for any funds received in its capacity of mortgage broker.
MOTOR VEHICLE DEALERS BOND (New or Used Car Dealers)
This bond protects the public from any losses incurred by fraudulent practices, violations or misrepresentations of the auto dealer or its sales force. The bond differs by state but it may guarantee good title to the vehicle, fraudulent turning back of odometers, remittance of sales tax to states, warranties, etc.
PRIVATE SCHOOL BOND
This bond guarantees that the Principal will comply with the state's regulations pertaining to curriculum, qualifications of the teachers, etc. The bond also guarantees that the school will return any advance tuition payments if they are unable to provide the services.
TAX BONDS (Tobacco, Fuel, Liquor, Sales, Amusement, etc)
These bonds guarantee the proper accounting for and remittance of taxes and other fees due the government on items handled by them in the normal course of business. Taxes are usually paid by someone else to the Principal for items purchased.
Public Official Bonds
A type of bond that guarantees a public official will act with honesty and/or faithful performance. These bonds are required by statutes and ordinances.
Fiduciary bonds which guarantee an honest accounting and faithful performance of duties by administrators, trustees, guardians, executors, and other fiduciaries. Fiduciary bonds, in some cases referred to as probate bonds, are required by statutes, courts, or legal documents for the protection of those on whose behalf a fiduciary acts. They are needed under a variety of circumstances, including the administration of an estate and the management of affairs of a trust or a ward.
A general term referring to bonds required in some action of law.
Bond guarantees that principal will pay utility bills to the utility company in a timely manner.
MISCELLANEOUS SURETY BONDS
Miscellaneous Surety bonds are those that do not clearly fall within the scope of Public Official, Fiduciary, Court or License and Permit Bonds.
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|*Some information provided by the National Association of Surety Bond Producers