A Bond is a 3-party contract guaranteeing that if one person (the principal) fails to perform as specified or proves to be dishonest, the person to whom duty is owed ( the oblige) will be financially protected by the issuer of the bond (the surety).
Various types of bonds are:
Fidelity Bond – a bond that will reimburse an employer (the insured) for loss due to the dishonest acts of a covered employee. Also known as, Commercial Crime or Employee Dishonesty coverage.
Fiduciary Bond – a bond which guarantees the faithful performance of a fiduciary. Examples are: Contractor’s bonds; Janitorial Bonds; Auto Dealers Bonds; Professional License Bonds, etc…
ERISA Bond – a requirement by the Pension Reform Act of 1974, that specifies all fiduciaries (trustees) of a pension or profit sharing fund are required to post a bond for at least 10% of the amount of funds handled.
To determine whether a bond is needed, please refer to your 3rd party contracts to specified requirements.