Bonds are legal contracts that concern three distinct parties, the obligee, which is the party that requests the bond, the surety, which is the insurance company and the bonded party, which is the client that seeks the bond.
It must be understood that a bond is not the actual insurance policy. The difference between insurance bonds and insurance is that the former will pay for damages due to failure of meeting conditions while the latter pays for damages caused by accidents.
In the case of surety bonds, this acts as a guarantee that the bonded party will keep to the obligations stated in the contract. Such obligations can include respecting timelines for projects, performing tasks respecting certain codes and other similar obligations.
The bond becomes void when the bonded party had met with all of the contracts conditions; this means that both the surety and the bonded party must meet the conditions. The obligee has the right to claim the respect of conditions and monitors the process of the contract.
There are numerous types of bonds and here are just a few:
The price of bonds really depends on certain factors including the credit of the bonded party, the type of bond and the amount. There are certain bonds that need credit and financial underwriting and you can find insurance companies competing among each other, so a bond that costs 150 with a company may cost 75 with a different company.