Commercial Surety Bond
In a nutshell, a commercial surety bond is a guarantee that one person is going to fulfill their duty to another person and that guarantee is made by a third party who puts their own money up as collateral in case the promise isn’t kept. Of course, it’s a little more complicated than that. Firstly though, since you’re seeing this on an insurance website, it’s important to clarify that a commercial surety bond is not insurance, even if it is being supplied by an insurance company.
Commercial Surety Bonds Explained
Looking for a Commercial Surety Bond in Canada? Contact us HERE to get an online quote now!A surety bond, in general, involves three parties. Those parties are:
- The Principal. The Principal is the person offering their services to a client.
- The Obligee. The Obligee is the client to whom the services are being offered. The Obligee is the one who needs protection because they will suffer some form of loss if the Principal doesn’t live up to their agreement.
- The Surety. The surety is the party, usually an insurance company, that guarantees the Obligee that the obligation will be fulfilled as promised by the Principal by offering their own money as collateral if the Principal fails to live up to the agreement. Before agreeing to do this, the surety will perform some sort of investigation of the Principal to satisfy themselves that the Principal can and will fulfill their duty.
The surety makes the guarantee by issuing a commercial surety bond which is a contract involving all three parties. If the Principal fails to live up to the agreement, the Obligee can cash the bond and receive financial compensation and the Principal is then responsible for paying the Surety back for the money that was paid.
A commercial surety bond is a type of bond that is used by federal and provincial courts, governmental bodies, financial institutions and private companies as a guarantee that the Principal will abide by all required legal obligations – including those in the contract surety bonds.
Types of Commercial Surety Bonds
Commercial surety bonds are different from construction bonds and can fall into four general categories:
- Court Bonds which can be further broken down into:
- Judicial Bonds
- Fiduciary Bonds
- Customs & Excise Bonds
- License & Permit Bonds
- Lost Documents Bond
Below are brief descriptions of each category of commercial surety bonds.
Court Bonds
Court Bonds are required by a federal or provincial court in the following scenarios:
- Judicial Bonds – are used as protection against uncertainty in legal proceedings. Examples include:
- Plaintiff’s bonds
- Defendant’s bond
- Appeal bonds
- Injunction bonds
- Fiduciary or Probate Bonds – requires that a person acting as an administrator, executor, guardian, trustee, etc., will faithfully fulfill their duties and abide by all relevant laws and court orders. Examples include:
- Waiver of Probate Bond
- Administration/Estate Bond
- Foreign Executor Bond
- Guardian/Committee Bond
- Trustee in Bankruptcy Bond
Customs & Excise Bonds
Customs and excise bonds may be required by the federal and provincial governments from imports/exporters, manufacturers, distributors, etc., as a guarantee that all applicable taxes and duties that these companies will pay on goods sold in Canada.
Examples of custom types of bonds include:
- Custom Broker License Bonds
- Customs Bonded Warehouse Bond
- Release of Goods Bond
Examples of excise bonds:
- Fuel Tax Bond
- Excise Tax Bond
- Excise Stamp (Tobacco) Bond
- Non-Resident GST Bond
License & Permit Bonds
License and permit bonds are required by the federal, provincial and municipal governments for businesses that deal in certain, regulated industries that require a license as a guarantee that the business or individual complies with all the necessary regulations.
Examples include:
- Automobile Dealer Bond
- Grain Dealer Bond
- Private Investigator / Security Guard Bond
A lost document bond guarantees that if a financial document is lost, the financial institution will issue a replacement. The financial institution is reimbursed if both documents are cashed in.
Examples include:
- Fixed Penalty
- Open Penalty
- Waiver of Probate
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How to Get a Commercial Surety Bond in Canada?
We carry a full selection of commercial bonds so even if the one you need isn’t mentioned here, contact an advocate who will be more than happy to help with any questions.
