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FAQs

for Bonds

1) What kinds of Bonds does Daniels-Head offer?

Daniels-Head assists customers to obtain "surety" or "suretyship" bonds. These are bonds that back up the performance of a certain kind of service performed by a qualified individual whose affairs require a guarantor.

The bonds are purchased, in this instance, from a surety company.

2) What is the surety's job?

The purpose of the surety is to protect public and private interests against financial loss. The surety bonding company should be profitable and have a strong balance sheet. No one wants to accept the guarantee of a party with a bad name or a poor credit rating. The surety bonding company guarantees performance. Its good name and its balance sheet back up that guarantee.

3) Are these kinds of Bonds similar to an insurance policy?

Although surety companies are often regulated by state insurance departments, surety bonding is different from insurance in several ways.

Suretyship v. Insurance

Three party agreement. Most surety bonds are three party agreements. The surety guarantees the faithful performance of the principal to the obligee.	Two party agreement. Insurance is basically a two party agreement whereby the insurance company agrees to pay the insured directly for losses incurred.
Losses not expected. Though some losses do occur, surety premiums do not contain large provisions for loss payment. The surety takes only those risks which its underwriting experience indicates are safe. This service is for qualified individuals or businesses whose affairs require a guarantor.	Losses expected. Losses are expected. Insurance rates are adjusted to cover losses and expenses as the law of averages fluctuates.
Premiums cover expenses. A large portion of the surety bond premium is really a service charge for weeding out unqualified candidates and for issuing the bond.	Premiums cover losses and expenses. Insurance premiums are collected to pay for expected losses. If an insurance company can get enough average risks of one class, it will always have enough money to pay losses and the expenses of doing business.

4) What are the different classifications of Surety Bonds?

There are several:

Fidelity Bonds

There is always the possibility than an employee will steal. Theft is a leading cause of small business failure. The only protections against this kind of loss are good internal controls, regular outside audits and a Fidelity Bond.

Generally speaking, Fidelity Bonds cover losses due to dishonest acts of a bonded employee. The employees may steal alone or with others. The loss may be money, merchandise or other property. Fidelity Bonds are usually available in a group (blanket) or individual (schedule) form, but the terms and conditions offered may vary.

Judicial Bonds

Judicial bonds are written for parties to lawsuits or other court actions (plaintiffs and defendants).

In anticipation of a favorable judgment, plaintiffs often want to take possession of the property, cash or merchandise in question without waiting for the trial. Those who are financially reliable can often achieve that goal by posting a plaintiff's court bond. The plaintiff's bond is usually required to protect the defendant should the court decide that he, and not the plaintif, is entitled to the property or the judgment.

Types of plaintiff bonds include Sherrif's Indemnity Bonds and Cost Bonds. Other types of plaintiff's bonds include Cost on Appeal, Injunction, Attachment, Objecting Creditors, Replevin and Petitioning-Creditors-in-Bankruptcy Bonds.

The second type of Judicial Bond is the defendant's bond. A defendant in a court case might want a bond to counteract the effect of the bond that the plaintiff has furnished.

Some common types of defendant's bonds are Release of Attachment and Counter Replevin Bonds. Generally speaking, these bonds have proven to be more hazardous (for the surety) than plaintiff's bonds. Accordingly, they can only rarely be written withou the posting of adequate collateral to protect the surety from loss.

In criminal actions, Bail Bonds are the most common type of defendant's bonds. They guarantee that the defendant will show up for trial. Daniels-Head does not deal in the Bail Bonds marketplace.

Fiduciary Bonds

A fiduciary is a person appointed by the court to handle the affairs of persons who are not able to do so themselves. The fiduciary is often called a Guardian or Conservator when the affairs of a minor or an incapacitated person are being handled. An Administrator is a fiduciary who handles the affairs of someone who has died; this person is known as an Executor if specifically named in the will.

In addition to loss prevention services performed by the surety for the holder of a fiduciary bond, the fiduciary bond creates protection. If there should be a covered loss, the surety pays the heirs, wards, creditors, and beneficiaries in question.

License and Permit Bonds

A business takes few actions today without governmental permit or approval. Many of these governmental permits are granted only after the business posts a bond guaranteeing compliance with laws, ordinances, and regulations.

License and Permit Bonds "put teeth" into the laws passed for public protection. For example, sewer builders must conform to city sanitary regulations. They must give a bond to guarantee compliance with city regulations. If they do not comply, the surety pays damages or ensures compliance. The surety's great care in selecting its risk helps insure that only capable sewer builders will be licensed.

Miscellaneous Performance and Federal Bonds

There are as many categories of surety bonding as there are categories of agreements, contracts and situations where people may fail to perform as promised. Some of these are:

Notary Public Bonds; Bill of Lading Bonds; Lost Instrument Bonds, Personal Representative Bonds, US Excise Bonds, Importer/Exporter Bonds and more!