We are a National Insurance & Surety firm specializing in helping customers meet their Insurance & Surety needs throughout the United States.

The Definition of Bonds

The Definition of Bonds

What is the Definition of a Bond

You might need to be bonded for a variety of reasons, from meeting the regulations of your industry to potentially securing more customers. However, you may be a bit uncertain as to a definition of bonds themselves. When you are more familiar with what a bond really is, you should then understand why getting one could be so important for you or your business. Use the following information as a guide to exploring the meaning of a bond, as well as what being bonded can help you to accomplish. We are always happy to provide you with more information if you have questions about bonds.

Definition of Bonds

Let us help you learn what sureties are.  If you are ready to get covered, call our office today.  Let’s get the process rolling, and we’ll show you how easy it is to bond your business.  We are nationwide, and there is nothing we can’t cover.  Poor credit is not problem.  If you have a question regarding sureties, call our office….we’re happy to help.

Different Kinds of Sureties

When you are contemplating – definition of bonds, keep in mind that there are various types of bonds. Some of these bonds are purchased through financial institutions. Others are obtained as a means of insurance, and they may be required by the government or another entity (such as a construction company). When you purchase one, it is crucial that you ensure you are getting the right kind for your purposes. In all cases, bonds serves as a pledge or guarantee of some sort.  NFP Surety only writes with top-rated carriers, such as Western National, CHUBB, Hanover, Travelers, Philadelphia, Liberty Mutual, and more,

Click here to Get Bonded in Minutes!

We get you bonded for several types of bonds in minutes! Let us do the shopping for you!

definition of bonds

Financial Bonds Definition

Essentially, a financial bond is a kind of investment. A financial bond is a debt sold by an entity such as the government or a corporation, for example. Basically, buying this kind of bond means that you are making a loan, and you would be in possession of the bond for at least a year. You might also receive interest on the principal (the amount you paid for the bond).  Bonds definition below…

Surety Bonds Definition:

A look at different kinds of surety bond that we can help you with…

Sureties- These are entirely different from financial bonds. Sureties are an agreement that involves three parties: the obligee, the principal, and the surety. The obligee is the person or entity that requires an individual or business to be bonded. The person who is obligated to purchase the bond is known as the principal. The surety is the institution that supplies the bond, as well as to make a financial guarantee for the principal to the obligee. Generally, there are seven different kinds of bond categories: fidelity, public official, judicial (court), probate, license and permit, contract (bid and performance), and miscellaneous and federal bonds.

Fidelity bond – A fidelity bond offers insurance against loss that might arise as a result of employee misconduct. The misconduct could come in the form of theft not covered by a company’s ordinary insurance. This bond type can be customized to apply to a specific employee or type of employee. It may also be purchased as a more general kind of insurance for all the employees of a business.

Public Official – When a person works in the capacity of an official public office, a public official bond may be in order. This type of bond ensures the honesty and performance of the individual, which includes honest accounting for all monies with which this public servant is entrusted. A bond of this sort would guarantee compensation for the loss of expenses, fines, and fees incurred as a result of regulatory non-compliance by this person.

Judicial (Court) – A court bond is a specific monetary amount which is determined by a judge in a court of law. This kind is meant to ensure that a defendant will appear for a court date. If the bond is paid, the defendant is granted permission to go home until the date of the trial. If the bond is not paid, the person must remain in custody until the court date. An appeal bond would be required in an appeals case before the court hears the case.

Fiduciary (Probate) – These bonds are another type which is related to the judicial system. This bond type is intended to protect certain parties from loss due to a misdeed on the part of a court-appointed individual. A person appointed by the court in such a case might be in charge of another person’s taxes and property, such as an elderly person who is no longer able to attend to such details. A court might require a this bond for anyone who is appointed to protect the interest of another individual.

License & Permit – A license and permit bond may also be referred to as a license bond or a permit bond. This sort of bond would be required by a government agency for a business in a specific industry. These are used in a broad range of industries, and they could be required of businesses such as auto dealerships, collection agencies, mortgage brokers, and travel agencies.  Our mortgage broker bonds can be written with Capital Indemnity, Philadelphia, and CNA surety.   A license and permit bond is designed to ensure that a business remains in compliance with industry laws and regulations.

what is the definition of a bond

Contract (Bid and Performance) Bonds definition – Contract bonds serve to guarantee that contractors will adhere to the terms of their contracts. The bid type is meant to guarantee that a contractor will enter into a contract as agreed, and at a bid rate that was already agreed upon by both parties. A performance bond guarantees that the contractor will do the work that both parties agreed to when discussing the terms of the contract. The performance bond generally replaces the bid bond once the contract has been awarded.  The majority of bonds are either contract or L&P bonds.

Miscellaneous and Federal– Federal sureties are fidelity bonds designed to cover people who may be difficult to employ. Workers fitting this description could include those recovering from substance abuse issues, individuals who lack employment histories, people who were dishonorably discharged from military service, and applicants who have poor credit records. A federal bond would cover the first six months of an applicant’s employment. A business could be compensated for loss due to a misdeed, such as theft, on the part of the employee.

Miscellaneous bonds are sureties that do not fit into another category.

The Value of Surety Bonds: Bonds Definition.

Sureties serve an invaluable purpose to a great number of individuals and businesses. A surety can benefit both an obligee and a principal. A contractor who is a sole proprietor may be able to secure more business by becoming bonded. An individual or entity that pays for a service is guaranteed against loss with a surety bond. In many cases, businesses cannot operate without obtaining a bond. A surety may also ensure that a different kind of obligation is fulfilled, such as a defendant appearing for a court date or a court-appointed individual fulfilling the terms of a trust. Without a bond to provide insurance against loss, countless individuals and entities might suffer unfairly when others do not fulfill their legal or contractual obligations.  Many of our contractors are bonded with CHUBB Surety, The Hartford Bonds definition, and more.  Let us help you truly understand what is a contractor bond by reading our dedicated page.

Contact Surety by NFP today for all your bonding needs.  We write all kinds of surety bonds, Nationwide. What is the definition of a bond?  We’ll help you learn! 

bonds definition

NFP Surety

We Know Surety Bonds

ALL Types | ALL States!

Quickest Bonding in the Industry

Phone: (800) 863-3210
Fax: 623-486-3096


Apply in Minutes!