Phil Pavarini is a licensed insurance producer and is compensated when a bond is placed through this site. This page is general information, not legal, tax or fiduciary advice, and it is not a substitute for reading your plan document or contract or for advice from your own counsel. Figures shown are current as of the date on this page.
A bond requirement always comes from somewhere: a statute, a regulation, a court, a licensing board, or a contract. Most guides skip that part and start selling. These guides start there, because the source decides everything that matters about the bond: who has to carry it, how big it has to be, who it protects, and who applies for it.
Choose the bond type you are dealing with. Each one has its own guide and its own application.
Bond types covered here
Three questions that decide almost every bond requirement#
- Who imposes it? A court, a state agency, a federal statute, or a private contract. This decides the form, who the obligee is, and who can make a claim. It is also the only reliable way to settle a disagreement about whether you need one.
- What sets the amount? A fixed schedule, a percentage of something, or the terms of a contract. Percentage requirements are where people go wrong, because the number has to be recalculated and nobody puts that on a calendar.
- Who does it protect, and who pays if there is a claim? A surety bond guarantees that someone will perform, and the surety expects to be repaid by the person it bonded. A fidelity bond protects a fund against theft by the people running it, and works more like insurance. The two get mixed up constantly, and the difference changes how the bond is underwritten.
What these guides will not do#
They will not tell you that you definitely need a bond, because that depends on facts about your situation that a web page does not have. They will not quote a premium as though it were a rate card. And they will not pretend a federal requirement is a state one, or the reverse, which is the most common error in this whole category.
What they will do is name the source, the formula or contract terms that set the amount, and the exemptions, so you can check the answer yourself.
Common questions
Is a fidelity bond the same thing as a surety bond?
No, although the words are used interchangeably in a lot of places. A surety bond is a three-party guarantee: if the principal fails to perform, the surety pays the obligee and then looks to the principal to repay it. A fidelity bond protects against dishonesty by a defined group of people and works more like insurance. Each guide here says which kind its bond is.
How do I know whether a bond is really required?
Find the source. A genuine requirement has something behind it: a statute, a regulation, a court order, a license application, or a clause in a contract. If whoever is telling you about the requirement cannot point at the source, treat it as a sales pitch until proven otherwise.
Does my credit matter?
It depends on the kind of bond. Where the surety expects to be repaid after a claim, which is most surety bonds, the credit of the business owners is a major factor. Where the bond works more like insurance, as most fidelity bonds do, credit usually matters little or not at all. Each guide explains how its bond is underwritten.
Who issues these bonds?
A corporate surety or insurer. For any bond required under federal law the company generally has to appear on the U.S. Treasury list of approved sureties, which is published every year. The bond form itself, not the agency that sold it, tells you which company is actually on the risk.