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3 Types of Bonds and Their Primary Purpose3 Types of Bonds and Their Primary Purpose

There are three kinds of bonds – bail bond, surety bond and construction bond. Most people have heard of a bail bond, some have even heard of a surety bond, but the majority of folks have never heard of a construction bond. Curious what these are and what purpose they serve? Check out what each type is and how they work.

A Look At A Bail Bond

A surety bond company provides a bail bond via a bail bondsman or agent to secure a defendant’s release from jail. There are two kinds of bail bonds – civil bail bond or criminal bond.

  • Civil Bail Bond – This type of bond is offered in civil cases, guaranteeing debt payment, along with any costs or interests, the court places against a defendant.
  • Criminal Bond – This type of bond ensures a defendant will show up to court on the scheduled date and time, and provides payment for any monetary penalties assessed on a defendant.

The U.S. Constitution states bail cannot be more than a defendant’s ability to pay. A judge will consider four factors to determine whether or not bail is granted and the dollar amount.


A Look At Construction Bonds

Investors involved with construction projects use a surety bond called a construction bond (or contractor license bond). This kind of bond provides a project owner with a guarantee that the contractor will fulfill the terms outlined in an agreement. In bigger projects, the construction bond may be separated into two parts – one for protection against a project not being completed and the other for protection from subcontractors not paying for materials.

 In essence, the bond is designed to ensure the bills of the project are paid.


A Look At Surety Bonds

This kind of bond is the kind of insurance policy for the person needing it (typically a government agency) to mitigate losses for the entity and citizens. It’s a contract between three entities:

  • Surety company (writing the bond)
  • Principal (entity needing it)
  • Oblige (department that demands it)

The surety bond is a guarantee that outlines the terms between the principal and obligee. If the requirements of the bond are not met, a claim can be filed against it.

When it comes to bonds, there are many types out there. If you own a business, it’s essential to know what each type is and what type you need to succeed. Check us out on Facebook to learn more and how we can help you.