Bonds aren't traditional types of insurance, a bond is a guarantee - either guarantee of repayment, reimbursement for financial losses, or a guarantee of performance.
There are three parties to a bond:
Principal: a person who promises to fulfill the obligation and who purchases the bond.
Obligee or Insured: the person whom the promise has been made to; this is the person who receives the bond should the promise be broken.
Guarantor or Surety: the entity that provides the financial backing for the guarantee, known as a bond penalty.
Bonds fall into two different groups:
Surety Bonds - these bonds do not pay for losses, surety bonds guarantee specific duties and obligations will be fulfilled.
Fidelity Bonds - these bonds are used to guarantee honesty and trust, not performance.
Janitorial bonds or service contractor bonds will help to protect the service provider from possible claims from clients or dishonest action from the service provider such as stolen properties of the clients by the employee/s while the service is being conducted. In case of theft/s, the claim will be taken to court and if found guilty, the bond company will pay the client and later will request the service provider to pay back the costs.
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