State Farm® has a full service commercial Surety and Fidelity Bond Department to assist you with your bonding needs. State Farm's financial strength along with our more than 17,000 local agents are dedicated to providing you or your business professional superior service.
Surety Bond
Why do I need a surety bond for my business?
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As a business owner, you may need a surety bond to guarantee payment for state sales taxes or utility bills.
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Or as a contractor, you may need to post a license or permit bond to guarantee your work for licensing requirements with municipalities.
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Attorneys may have clients that are required to post court bonds such as administrators or executors bonds to guarantee their performance while distributing assets in estate situations.
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Notary publics are required to post bonds in most states.
Types of Surety Bonds
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License & Permit Bonds
License bonds guarantee the Principal will comply with applicable codes and regulations established by the Obligee. (The Obligee is usually a government entity such as a City, Town, or State.) Permit bonds grant a Privilege.
Types include:
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Electrician's license
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Plumber's license
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General Contractor's license
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Driveway permit
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Sign permit
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Sales tax
Example: Electrical contractors may be required to post a bond as part of their licensing requirements. The obligation of the bond may specify that the contractor will follow the electrical codes established in that city, town, or municipality.
The requirements of the bond and ordinance must be understood before the bond is written. The agent may ask you to obtain a copy of the ordinance or law that specifies the requirements and a copy of the bond, if the Obligee has its own.
Depending upon the type of obligation, supporting documentation such as signatures, financial statements, and other supplemental information may be required.
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Public Official Bonds
A Public Official bond guarantees that elected or appointed officials will faithfully perform their duties. The bond amount, as well as duties, are usually specified by statute or ordinance.
Types include:
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Treasurers
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Tax Collectors
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Peace Officers
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Judges
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Hunting & Fishing license agents
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Notaries
It should be noted that not all public entities require Public Officials to be bonded.
Underwriting aspects of Public official bonds include understanding the duties required of the Official, the reputation (character) of the official, and experience of the official.
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Probate & Other Court Bonds
A Probate bond guarantees an honest accounting and faithful performance of duties by fiduciaries/trustees. These bonds are required by courts or statutes as estates of deceased persons, incompetent persons, and minors are set up and administered. (For the estates)
Types include:
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Administrator
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Executor
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Guardian
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Conservator
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Trustee
A Bankruptcy or Equity bond might be required of an appointed fiduciary for the sale of real estate or for property in foreclosure, reorganization or other litigation. This bond guarantees an honest accounting and performance of duties while managing and distributing the assets as directed by the court.
Common types include Receivers and Trustees.
Other Judicial bonds may be required by a court in cases where someone is seeking legal benefit or relief. Specific supplemental information may be required.
Types include:
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Appeal
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Injunction
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Attachment bonds
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Release of lien
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Miscellaneous Surety Bonds
Miscellaneous surety bonds include those that do not fit into any of the other surety categories. These are usually more hazardous obligations.
Types include:
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Utility payment guarantees
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Lost Security/Lost Instruments (cashier's check, stock certificates, and municipal bonds)
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Union Wage & Welfare
Miscellaneous surety bonds require more extensive underwriting because the guarantee to the obligee is monetary. In addition to the application, supporting information such as signatures, financial statements, and other supplemental forms are usually required.
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Contract Performance Bonds
Simply stated, contract bonds guarantee the performance of a written contract according to its terms and conditions.
Due to the nature of contract surety bonding, contract bonds require extensive underwriting. We recommend contacting your local State Farm agent at least one month before bidding on a contract.
State Farm's contract bond market focus is on the small artisan contractors market.
Types of Contract Bonds:
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Bid bond
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Performance bond
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Payment bond
A Bid bond guarantees that if a contractor is the low bidder on a project, he/she will enter into a contract and provide a Performance bond.
A Performance bond guarantees the contract will be completed according to its terms and conditions. A Payment bond guarantees payment of laborers, subcontractors, and material suppliers.
Example: An electrical contractor may need contract bonds to guarantee the performance of construction contract or to guarantee the supply of goods and materials. Most public works projects required Bid, Performance, and Payment bonds from the contractor. These bonds will guarantee the contractor's performance according to the terms of the contract with the project owner.
Fidelity Bond Policies - Blanket/Schedule
Types of Fidelity Bonds
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Blanket Fidelity Bond
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Covers ALL EMPLOYEES of the named insured unless specifically excluded
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New employees are automatically covered
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All employees are bonded for the same aggregate amount
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Limit of liability applies "per occurrence" as defined in the policy
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Premiums are based on the amount of coverage requested, the total number of ALL employees, the business activities of the insured, and the amount of the deductible. Common uses for a Blanket Bond would be:
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Businesses with large numbers of employees
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Businesses with frequent employee turnover
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Organizations with voluntary or honorary positions (not for profit associations)
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Schedule Fidelity Bond
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Used in businesses where employees tend to have greater responsibilities combined with the handling of larger sums of money (real estate managers, bookkeepers, office managers)
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Applicable to a few or only selected employees
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Covered employees will be scheduled or named by position
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Employees can be bonded for different amounts
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Limit of liability is per name/position scheduled
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Premiums are based on the amount of coverage, number of individuals scheduled, the amount of coverage for each person listed, the business activities of the insured, and the deductible amount
This is only a general description of coverages of the available types of insurance and is not a statement of contract. Details of coverage, limits or services may not be available for all businesses and vary in some states. All coverages are subject to the terms, provisions, exclusions and conditions in the policy itself and in any endorsements.
