Bonds come in several different varieties to fit different needs and situations. In general, bonds are a financial guarantee that one will perform according to the specifications of a contract, ordinance or other requirement. The two main types of bonds are surety bonds and fiduciary bonds.
A surety bond is often requested by a general contractor or project owner from a company hoping to work on the project. The bonding company guarantees that the work will be completed by the bonded company. If the bonded company fails to complete the job, the owner would use the bond proceeds to pay for a different company to complete it. Think of the bonding company as a co-signer on loan that will only be taken out if you fail to complete the project.
A fiduciary bond guarantees that a court-appointed executor or guardian performs properly and does not misuse the funds. A fiduciary bond is required by the court to protect the person for whom the fiduciary is acting, such as an estate or disabled person. A fiduciary’s responsibilities could range from managing an estate to giving financial advice.