Bonds
Bonds are often required by business and government agencies. There are many types of bonds.
Fidelity
Bonds
Employee
theft can deliver a severe blow to a business. Believe it or not, surveys have
shown that a large number of employees have admitted stealing from their
employers during the previous year. Small
companies can be especially hard hit because they can't afford extensive
safeguards and do not have the financial capacity to absorb the losses.
Fidelity
Bonds or Employee Dishonesty bonds is a guarantee that the bonded employee(s) will
handle their employer's money and property with fidelity or have to pay if they don't. In other words, it is a guarantee by them that if they do you can be reimbursed.
Types
of coverage are as follows:
Coverage
A
— Blanket Position coverage designed to cover certain professional businesses.
Coverage
B
— Blanket Position coverage designed to provide coverage for employee
dishonesty for businesses with more exposure such as retail stores, gas
stations, and restaurants. This bond also will provide coverage for employees
who may steal from a subscriber of the business. Conviction clause applies in
most states.
Employees
of Janitorial businesses are vulnerable to dishonesty claims from their customers.
After all, their employees have access to customers' assets, equipment,
supplies and personal belongings. These
employees are easy targets for blame. Any customer who finds something missing
is likely to suspect those who do the cleaning. The fact is dishonest employees
can significantly damage their employer's business.
This
bond is specifically designed to provide protection for the customers of a
janitorial service. They may have good
luck and never have problems with a dishonest employee; but they will rest
easier knowing they are covered
Pension Trust (ERISA) Bonds
Pension Plans and profit sharing programs are managed by appointed individuals
known as plan fiduciaries. The Pension Reform Act of 1974 states that the
fiduciaries of a pension or profit sharing fund are required to post a bond for
10% of the amount of funds handled.
License and Permit Bonds
License and permit bonds are bonds required by state law, municipal ordinance or regulation that is required to be filed prior to being granted a license or engaging in a particular activity. You may find some information including permit and license applications by visiting the Texas.gov website at http://www.state.tx.us/ and searching under "List of Texas Cities". Some common surety bonds that may be required by statute in order to obtain a license or a permit from a state agency, or to meet financial responsibility, are listed below with a link provided for additional information.
Common Types of Construction Contract Bonds
Bid Bonds
A Bid or Proposal Bond is often required when construction contracts are to be let out for bids. The successful bidder is expected to furnish the necessary Performance and/or Payment Bond in order to start work on the project. Default results when the lowest bidder does not obtain the Performance and/or Payment Bond to enter into the contract. The coverage under the Bid and Proposal Bond is limited to the difference between the successful bid and the next low bidder that can qualify for the contract, subject to the limit of the bond.
Performance Bonds
A Performance Bond is required in most instances:
- For a federal construction project under The Miller Act (40 U.S.C., Sections 3131-3134);
- Public
work for
- An owner may also request a Performance Bond for private work. The Performance Bond coverage guarantees financial protection if the principal does not faithfully perform to the terms and conditions of a written contract.
Payment or Labor and Material Bonds
A Payment or Labor and Material Bond is also required for:
- Federal construction projects (The Miller Act);
- When a contract is in excess of $25,000 for public work (Government Code, Chapter 2253);
- Private work under Property Code, Chapter 53. The coverage provided by the Payment or Labor and Materials Bond helps guarantee that the contractor will pay for labor and material used to complete the project that is the subject of the contract. When both a Performance Bond and Payment Bond are required, they are issued for limits in the amount of the contract.
Maintenance Bonds
Maintenance Bonds or Maintenance Guarantees for a term of up to 12 months are normally included with the Performance Bonds. Separate Maintenance Bonds may also be executed where no Performance Bond is required. The coverage provided by a Maintenance Bond is a guarantee against defective workmanship and materials.
To review the Government Code, Chapter 2253 or Property Code, Chapter 53 go to: http://www.capitol.state.tx.us/statutes/statutes.html
When a bond issuer
wants to assure potential investors that a bond is really and truly safe, they
often turn to a bond insurance agency, like David Kimbrough Insurance Agency.
We can make both you and your potential investors feel comfortable and secure
with their bond purchase. Simply fill out our quick and easy online form or
call us at 281-996-7615 today for a free secure bond insurance quote.
For a wealth of
information on bonds, see the Texas Department of Insurance website at: http://www.tdi.texas.gov/commercial/pcbond.html#type
Optional insurance benefits have additional costs.
Texas Insurance Agency offering Insurance Bonds policies in
Friendswood,
Houston, Pasadena, and League City Texas.