What Is A Surety Bond?

Surety bonds are designed to guarantee performance in the face of a set of particular risks. Each surety bond must be uniquely tailored to meet specific needs.

A surety bond is an agreement under which one party, the surety, guarantees to another party, the obligee, the performance of an obligation by a third party, the principal.

The three most common types of surety bonds include:

Contract Surety
Bonds that the government or an owner of a construction project may require a contractor to obtain. There are three types of contract surety bonds:
Bid bond - Affords protection to a project owner (obligee) in the event a successful bidder will not enter a contract and will not provide the required surety bonds or other security
Performance bond - Provides protection to the obligee if the contractor defaults on its obligations under the bonded contract
Payment bond - Guarantees that the contractor will pay subcontractor, labor and material bills associated with the construction project.

Special Risk
Coverages for the securities industry.

Commercial Surety
Bonds required of individuals or businesses by the government, legislation or by other entities. Travelers Bond & Financial Products  provides the following types of commercial surety bonds
License and permit bonds: required by state, municipal or federal ordinance or regulation. These bonds may be required as a condition for engaging in a particular business or exercising a particular privilege. Examples include performance and payment bonds, customs bonds, tax bonds and warehouse bonds.

  • Court bonds, including: 
  • Judicial bonds, required of either a plaintiff or defendant in judicial proceedings, to reserve the rights of the opposing litigant or other interested parties
  • Fiduciary bonds, required of those who administer a trust under court supervision.
  • Public official bonds: required by statute for certain holders of public office, to protect the public from malfeasance by an official or from an official's failure to faithfully perform duties.
  • Miscellaneous bonds: do not fit into any of the other categories above.

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Travelers Casualty and Surety Company of America and its property casualty affiliates.
One Tower Square Hartford, CT 06183

This material does not amend, or otherwise affect, the provisions or coverages of any insurance policy or bond issued by Travelers. It is not a representation that coverage does or does not exist for any particular claim or loss under any such policy or bond. Coverage depends on the facts and circumstances involved in the claim or loss, all applicable policy or bond provisions, and any applicable law. Availability of coverage referenced in this document can depend on underwriting qualifications and state regulations.

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