What exactly is a bond?
A bond in layman’s terms is a way to secure a debt.
It is a way of you the consumer, being able to put up a little cost up front that says “I am letting you borrow this money so as to your agreement to pay the face value of said bond if ever needed”. In the real world, bonds can be issued by a government, municipality, corporation, federal agency and other entities.
In the insurance world a lot of times you will see bonds requested in the following ways:
A surety bond is a contract between three parties. The person who is the recipient of an obligation, the primary party who will perform the contractual obligation, and the person who assures the obligation will be done.
Lost title Bond
These bonds are a type of surety bond. They provide a proof and guarantee of ownership to the Department of Motor Vehicles. When no other form of documentation is available a Lost Title Bond shows the DMV that you are the “owner” of said vehicle.
Contract Surety Bond
Contractor bonds are one of the most “popular” bonds you will see asked for in the insurance space. Contract bonds are used in the construction industry by general contractors. They are a guarantee to a project’s owner that the general contractor will adhere to the contract put in place.
License and Permit Bonds
These types of bonds function as a guarantee to a government entity that a company will comply with a statute, state law, ordinance, etc.
Some examples are but not limited to:
Contractors License Bonds
Motor Vehicle Dealer Bonds