Bond Glossary

Glossary of Bond

Terminology

accounting methods

For construction or building

contractors, the two methods of

accounting, both realistic and

preferred by surety companies,

are (a) the completed contract

method, and (b) the

percentage-of-completion

method.

administrator

A fiduciary appointed by the

probate court, in the absence of

a will, to manage or distribute

the assets of an estate and pay

all just claims and debts.

admitted company

An insurance or surety company

licensed to do business in a

given state.

alcohol bond

A general term describing a

bond given in compliance with

either federal or state laws or

regulations governing the sale,

manufacture or warehousing of

alcohol. The bond frequently is

referred to as a liquor bond

where the alcohol is intended

for beverage purposes.

appeal bond

One filed in court by a

defendant, against whom a

judgment has been rendered, in

order to stay execution of the

judgment pending appeal to a

higher court, in the hope of

reversing the judgment.

application

A questionnaire giving required

information concerning one who

requests a bond written in his

behalf, describing the nature of

the bond requested, plus the

applicant's promise to pay the

bond premium, and also to

indemnify the surety in the event

of default.

assets

The assets of a surety or

insurance company including all

funds, property, securities, etc.

Also, the property of an estate,

whether real or personal.

attachment

Taking legal possession of a

defendant's property when the

property is in dispute.

attorney-in-fact

One who holds a power of

attorney granted by a surety

company empowering the

execution of a surety bond.

(See "power of attorney")

bail bond

One given by an individual

accused or convicted of

violation of a law or ordinance

in order to secure his release or

liberty, guaranteeing that he will

appear in court at the time set

for trial.

bank depository bonds

Bonds that guarantee the

deposit of public funds.

bankruptcy trustee bonds

Bonds that assure a bankruptcy

action's beneficiaries that the

bonded (court-appointed)

trustees will perform their duties

according to the rulings of the

court.

bid bond

A guarantee that a contractor

will enter into a contract, if

awarded to him, and furnish

such contract bonds as are

required by the terms of the

contract.

blanket bonds

(Financial institutions). Those

issued to bankers, brokers,

savings and loan associations

and others engaged in the

financial field. These are broad

contracts covering losses of

property caused not only by

dishonest employees but also

burglary, hold-up, damage,

destruction, and other well-

defined causes.

blanket fidelity bonds

These cover the loss of money,

merchandise or (real or

personal) property, that an

employer either owns, has a

financial interest in, or

possesses, when such loss is

due to employee dishonesty.

blanket position bonds

Bonds which guarantee the

honesty of each of the

employees of the operation

described on the bond, for the

amount appearing on the bond.

blanket public official bonds

Such bonds cover a described

public operation's employees

for the amount stated on the

bond.

blanket position public

official bonds

The blanket position public

official bond covers each public

employee of the public entity

stated on the bond to the stated

amount of the bond.

blue sky bonds

Many states have blue sky laws

that prohibit the sale of

worthless securities. In

conjunction with such laws,

securities dealers are required

to furnish a blue sky bond. It

indemnifies a dealer's

customers against loss caused

by securities sales that were

based on false representations.

burglary

The taking of property from

inside the premises by a

person unlawfully entering or

leaving from the premises as

evidenced by marks of forcible

entry or exit.

capacity

Refers to the maximum bond

amount which a surety is able to

write.

collateral

Anything of value pledged with

the surety to secure it against

loss through default of the

principal who supplies the

collateral.

collusive loss

A loss through embezzlement or

defalcation shared in by more

than one dishonest employee,

acting in consort.

Combination Crime Plan

This is a commercial crime

program using a combination of

ten coverage forms available

under the simplified commercial

crime insurance policy. It

replaces the comprehensive

dishonesty, disappearance and

destruction policy and blanket

crime insurance.

computer fraud

Theft of property following and

directly related to the use of any

computer to fraudulently cause

a transfer of that property from

inside the premises or banking

premises to a person (other

than a messenger) outside

those premises or to a place

outside those premises.

construction contract bond

One that guarantees the faithful

performance of a contract bond.

It is a three-party agreement

between the contractor as

principal, the owner as obligee,

and the surety.

contract

An agreement between two or

more parties to do or not to do

a certain thing.

contract bond

One that guarantees the

performance of a contract.

contract price

The entire sum of money that

passes from owner to

contractor when final settlement

is made between the two under

the contract entered into

between them.

contractor defaults

Failures on the part of

contractors resulting from any

one or more of multiple causes

which effect breach of the

contract.

corporate surety

A surety which is a corporation,

licensed under various

insurance laws, and which

under its charter has legal

power to act as surety for

others.

cosurety

One of a group of sureties

directly participating in a bond,

with the obligation under the

bond joint and several.

cosuretyship

A procedure whereby two or

more surety companies jointly

become sureties on a bond.

court bonds

Court Bonds are required in

many court proceedings to

ensure that one is protected

from possible loss as a result of

the outcome of the proceeding.

There are two types of court

bonds: Judicial and Probate.

cumulative liability

When one bond is canceled

and another is issued to take its

place, and the first bond has a

"discovery period," the surety

company is exposed to the

possibility of a loss equal to the

aggregate sum of the two

bonds.

custodian

The insured, any partners or an

employee while having care

and custody of property inside

the premises, excluding any

person while acting as a

watchperson or janitor.

customs bonds

This type of surety bond

guarantees that an importer will

follow all of the rules and

regulations governing the

importation of merchandise into

the United States. It is given

from the surety company to the

U.S. government. It also

guarantees that all custom

duties and custom penalties will

be properly paid to the

government.

defalcation

A term for employee dishonesty

usually associated with

personnel of financial

institutions.

defendants bonds

Bonds given by defendants in

litigation enabling them to retain

or regain possession of

property, pending the outcome

of a suit, or to suspend the

execution of a judgment, order

or decree of a court while the

defendant seeks reversal of an

unfavorable judgment in a

higher court.

depository liability

The liability of a public official

as an insurer of public funds

which is deposited in a bank

and cannot be paid over

because of failure or insolvency

of the bank.

discovery period

Provision is made in certain

bonds and policies to give the

insured a period of time after

the cancellation of the bond or

policy in which to discover that

a loss has been sustained

coming within the terms of the

contract, and which would have

been recoverable had the

contract continued in force.

dishonesty insurance

A generic term describing

fidelity bond coverage

guaranteeing against loss

caused by dishonest officers or

employees of a commercial

firm or financial institution, or by

dishonest public officials or

employees.

earned premium

The earned premium on a

bond, which is payable in

advance, is at any time the

amount which would

compensate the surety for the

protection furnished for the

expired portion of the term of

the bond.

Employee Retirement

Income Security Act

This Act requires a bond to be

posted, in the amount of ten

percent of the funds, on the

fiduciary of pension funds and

profit-sharing plans.

embezzlement

A term for employee dishonesty

usually associated with

personnel of mercantile firms,

or public officials and

employees.

excess insurance

A bond or policy covering the

insured against certain hazards,

applying only to loss or damage

in excess of a stated amount, or

primary insurance.

exclusions

Provisions of a bond or policy

referring to hazards or to

property with respect to which

no insurance is afforded, e.g.,

nuclear fission or fusion under

financial institution bonds.

executor

A fiduciary named in a will to

manage or distribute the assets

of an estate and pay all just

claims and debts. (see

"administrator")

experience

The loss record of an insured or

of a class of coverage.

extortion

The surrender of property away

from the premises as a result of

a threat communicated to the

insured or an employee, or to a

relative or invitee of either, who

is, or allegedly is, being held

captive.

facultative reinsurance

Reinsurance of individual risks

by offer and acceptance

wherein the reinsurer retains the

faculty or privilege to accept or

reject each risk offered.

farm labor bond

A kind of surety bond required

by state and federal

government, this bond

guarantees the due amount to

farm laborers including

damages.

federal bonds

Immigrants bonds, internal

revenue bonds and customs

bonds. Loosely grouped under

the license and permit

classification.

federal official bonds

Bonds under which the surety

guarantees that the principal, or

federal official, will faithfully

perform official duties and will

account for all funds entrusted

to his care.

fidelity bond

A bond which will reimburse an

employer for loss, up to the

amount or penalty of the bond,

sustained by the employer

named in the bond by reason of

any dishonest act of an

employee covered by the bond.

fiduciary

A person who occupies a

position of special trust and

confidence, particularly one who

handles the affairs or funds of

another.

fiduciary bonds

Bonds issued for persons either

named in a will or appointed by

the court to manage the affairs

of others, such as wards,

incompetents, etc., or to

distribute a decedent's estate

assets in accordance with the

provisions of a will or order of

the court.

financial institution bonds

Coverages written on standard

forms, identified by form

numbers, making coverage

available to various classes of

financial institutions with

respect to employee

dishonesty, burglary, hold-up,

messenger robbery, and other

named hazards.

financial statement

A balance sheet which the

surety requires the applicant for

a bond (particularly a

contractor) to furnish, setting

forth the financial position as of

a given time or period.

fixed penalty bond

A bond the amount of which is

expressed in a certain sum of

money.

forgery

Generally, any false writing with

intent to defraud.

forgery bond

A contract of insurance, or

bond, wherein the insurance

company or surety agrees to

indemnify the insured for loss

sustained by reason of forgery

on stated instruments,

documents or securities.

funds control

Refers to overseeing a weaker

contractor's bonded project's

cash flow to make sure that

subcontractors and suppliers

are properly compensated.

hazard

This is a term applied to certain

conditions which may create or

increase the probability of a

loss, because of a given

covered peril.

hold-over public officials

Those who are elected or

appointed to succeed

themselves in office or who

continue in office beyond the

limits of their terms until their

successors are appointed or

elected.

honesty insurance

A generic term meaning fidelity

insurance guaranteeing against

loss caused by the dishonesty

of officers or employees of

mercantile firms or financial

institutions, or public officials

and/or their subordinates.

immigrants bonds

An important class of federal

bond covering immigrants who

enter the united states for

temporary reasons, such as

study, or for permanent

reasons, i.e., to become United

States citizens. Such bonds are

issued on appropriate

government forms, with a

number and descriptive title.

income tax bonds

These are given to guarantee

payment of federal income

taxes due or claimed to be due.

They are direct financial

guarantees and collateral

usually is required.

indemnify

To compensate for actual loss

sustained.

individual bonds

(see public official bonds)

insurance

A contractual relationship which

exists when one party, for a

consideration, agrees to

reimburse another party for a

loss caused by certain

designated contingencies.

insuring agreements

That part of an insurance policy

or bond which recites the

agreement of the insurer to

protect the insured against

some form of loss or damage.

This is the crux of the insurance

contract.

Internal Revenue bonds

An important class of federal

bonds, guaranteeing

compliance of producers of

distilled spirits, tobacco, etc.,

with laws and regulations, as

well as the payment of taxes.

Interstate Commerce

Commission (ICC) Bond

This is a financial guarantee

bond issued by the interstate

commerce commission to

protect the public against

default. It must meet the

requirements of the state and

federal governments.

joint control

An agreement by written

agreement between a fiduciary

and a surety, and

acknowledged by the bank in

which funds are deposited and

securities lodged for

safekeeping, whereby both

parties jointly supervise both

funds and securities, and their

withdrawal, entailing signature

and countersignature.

joint venture

A pooling of financial resources

and skills of several contractors

in order to undertake contracts

of construction which are too

large for their individual and

separate abilities, thereby

cutting down the overall

expense.

judicial bonds

A general term applied to all

bonds filed in courtÑwhether

fiduciary or court bonds. (see

"fiduciary" and also "court

bonds" for amplification)

judicial court bond

Court bond issued for Plaintiffs,

Replevin, Attachment, Costs on

Appeal, and Indemnity to

Sheriff. See Court Bonds.

labor and material payment

bond

A bond given by a contractor

guaranteeing payment for the

labor and material used in the

work which the contractor is

obligated to perform under the

terms of the contract.

labor union bonds

Bonds required under the U.S.

Labor management reporting

and disclosure act of 1959,

which contains a provision

requiring every officer, agent,

shop steward, or other labor

organization representative to

be bonded for the faithful

discharge of duties, including

the dishonesty hazard. Three

separate labor organization

bonds have been standardized

by the Surety Association of

America as a consequence of

the passage of that act. (See

also "welfare and pension

plans.)

large deductible plans

An insurance program bond

where the insurer pays all

losses, and then is reimbursed

by the policyholder on a monthly

or quarterly basis. The bond

guarantees the policyholder will

reimburse the insurer for losses

within the deductible.

lender bond

Considered the same as a

mortgage lender bond, this

bond is required by state law. It

guarantees that a lender or

broker will abide by the laws,

rules, and regulations obligatory

under the mortgage broker

license code.

liability

This is a broad term denoting

any legally enforceable

obligation.

license and permit bonds

These are bonds required by

state law, municipal ordinance,

or local regulation as a

condition precedent to the

granting of a license to engage

in a particular business or the

granting of a permit to exercise

a specific privilege. Certain

serious obligations are entailed

on those who seek such

licenses or permits, and are

thereupon bonded.

limit of liability

The maximum amount which an

insurance or surety company

agrees to pay in case of loss.

Also, in a corporate suretyship,

termed the "bond penalty."

liquor bond

(See "alcohol bond")

long-term bond

(fiduciary) A bond required of a

fiduciary whose duties are

normally expected to extend

over a considerable period of

time. (See also "short-term

bond")

loss ratio

The percentage which incurred

losses bear to premiums.

lost securities bonds

Those given by the owners of

valuable instruments, such as

stocks, bonds, promissory

notes, certified checks, etc.,

which are alleged to have been

lost or destroyed, in order to

protect the insurers against loss

which may result from the

issuance of duplicates of the

instruments or, in some

instances, payment of cash

value thereof.

maintenance bond

A guarantee against loss

because of defective

workmanship or materials used

in the performance of the

construction or supply contract.

manual

A book published by an

insurance or bonding

organization giving information

as to rates, classifications,

codes and other data

(specifically, for fidelity, forgery

and surety bonds, the rate

manual of the Surety

Association of America).

manual rate

The cost of a unit of insurance

or bond protection as published

in the pertinent manuals of

various organizations in the

insurance industry.

messenger

The insured, any partner or any

employee while having care

and custody of the property

outside the premises.

Miller Act Bond

A performance and labor and

material payment bond required

by the Miller Act on federal

work, as approved august 24,

1935 (for further reference: U.

S. Code, title 40, section 270a).

miscellaneous contract

bonds

A number of contracts, other

than construction contracts,

require surety bonds, such as

supply contract bonds, garbage

and ash removal, for carrying

United States mail, and for

demolition and wrecking

contracts.

miscellaneous indemnity

bonds

Bonds which do not fit any of

the well-recognized divisions or

subdivisions, and therefore are

thus categorized. The bond

manual will supply further data.

money

Currency, coins and bank notes

in current use and having a face

value; and travelers checks,

orders held for sale to the

public.

mortgage broker bond

Surety bond that must be

obtained before a mortgage

broker can get a license. It

protects the consumer from

wrongful acts made by the

mortgage broker.

motor vehicle dealer bonds

These bonds protect

consumers from wrongful acts

of motor vehicle dealers. They

are also called MVD bond, auto

dealer bond, motor vehicle

bond, RV dealer bond, used car

dealer bond and motorcycle

dealer bond.

moral hazard

The possibility of loss caused

or accentuated by dishonesty or

carelessness of the insured or

others. Actually, both words in

the definable sequence answer

the problem.

name schedule bonds

A bond that lists the names and

amounts of each individual

bonded, typically on a separate

schedule. Such bonds are often

used for a body of public

officials (a board or council).

notary public bonds

These are required by law to

protect against losses resulting

from the improper actions of

notaries.

notary surety bonds

This surety bond ensures that

the State will be reimbursed if a

notary fails to properly perform

his/her duties.

obligee

The party in whose favor the

bond runs, or one who is

protected against loss by the

bond.

obligor

Commonly termed the principal,

or one bound by an obligation.

Strictly speaking, under a surety

bond, both principal and surety

are obligors, since the surety

must answer if the principal

defaults.

open penalty bond

A surety bond without maximum

limit on the liability of the

principal or the surety.

ordinance

A local government (city or

town) regulation.

paralegal bond

(In this surety bond, the principal

is guaranteed to follow the rules

and regulations of both the

municipality and state

government.

patient trust bond

A surety bond that ensures that

a medical facility will not

mismanage patients' funds held

within the trust. They are

required of entities that provide

healthcare to their patients at

home or within the facility itself.

Also known as Medicaid Surety

Bonds or Medicare Bonds.

payment bond

Also called a "labor and

materials bond," this surety

bond guarantees that all bills

owed by a service provider will

be paid on time. It may also

include a performance bond.

performance bond

One that guarantees faithful

performance of the terms of a

contract for construction or for

furnishing of supplies.

personal surety

An individual who acts as surety

for another, who may or may not

exact a price for services, and

usually is not regulated by any

governmental agency, such as

is the corporate surety.

pest control bond

A surety bond for people in the

pest control business. This

bonds ensures that pest control

operators comply with the

guidelines outlined in their

license and will reimburse

anyone who charges them with

fraud or failure to provide the

agreed-to service.

plaintiff bonds

A court-required bond that

guarantees damages to the

defendant caused by the

plaintiff's lawsuit if the court

decides for the plaintiff.

plaintiffs bonds

Bonds given by plaintiffs in

litigation enabling them to

exercise certain privileges with

permission of the court, such as

attachment, injunction, and

replevin.

position schedule bonds

A type of fidelity or public

official bond that includes a

schedule of positions and their

corresponding penalty amounts.

The use of positions is more

practical than using the names

of persons who temporarily hold

them.

policy

A written contract of insurance,

and sometimes of suretyship.

power of attorney

Authority given one person or

corporation to act for and

obligate another, to the extent

laid down in the instrument

creating the power. In corporate

suretyship, an instrument under

seal which appoints an attorney

in fact to act in behalf of a surety

company in signing bonds.

principal

In suretyship the party whose

actions, honesty or

responsibility is to be

guaranteed. The principal in a

fidelity bond, for example, is the

bonded employee.

probate bond

A surety bond that ensures that

a fiduciary properly distributes

property to the right person as

per the will of the deceased.

probate court bond

Court bond issued for

administrators, executors. See

court bonds.

public official bonds

These are afforded in four

categories: individual, name

schedule, position schedule,

and public employees blanket

bond and public school system

employees blanket bond.

qualifying power

The largest net amount of risk

which may be carried by a

surety company on a bond.

(See treasury limits.)

rate

The cost of a unit of insurance.

rate manual

A compendium that lists,

among other items, the rates

established for individual risks,

e.g., the rate manual of fidelity,

forgery and surety bonds of the

Surety Association of America.

reclamation bond

A bond which guarantees that a

person or entity will restore

mined (or altered) land to its

original state.

refunding bonds

Refers to the practice of issuing

more bonds to pay off old

bonds that have just matured.

reinsurance

The practice of insurance

companies of protecting

themselves against excessive

loss, usually accomplished by

reinsuring with other companies

that portion of the assumed

liability that exceeds their net

line.

reinsured

A company which originates

insurance bond and passes

along a portion of its liability to

other sureties or reinsurers.

reinsurer

Each company accepting from

the originating company a

portion of its liability, expecting

compensation in the form of

premium participation.

replevin

A legal proceeding for

recovering specific personal

property.

retroactive restoration

A provision in a policy or bond

whereby, after payment of a

loss, the original amount of

coverage is automatically

restored to take care of prior

undiscovered losses as well as

future losses.

riders

Another name for clauses or

endorsements; more

specifically, the printed forms of

special provisions not

contained in the bond or policy

contract. In bonding, such

clauses are called riders

instead of endorsements.

risk

Any chance of loss. Also, the

insured or the property to which

the bond or insurance policy

relates.

robbery

The taking of property from the

care and custody of a person by

one who has: (a) caused or

threatened bodily harm to that

person; or (b) committed an

obviously unlawful act

witnessed by that person.

safe burglary

The taking of covered property

from within a locked safe or

vault inside the premises, with

visible marks of forcible entry

on the exterior of the safe.

sales tax bond

A sales tax bond promises that

the merchant will pay sales tax

to the obligee (e.g., state

government) from the purchase

of their goods or services.

Failure to pay collected funds to

the obligee or incorrect

reporting can result in a bond

claim.

salvage

The value of property after it has

been partially damaged by fire,

malicious mischief or other

perils. In suretyship, salvage is

that which is recovered from the

principal or an indemnitor to

offset in whole or in part the loss

and expense paid by a surety in

satisfying its obligations under

a bond.

SBA

Stands for the Small Business

Administration which sponsors

a program to help small and

minority contractors secure

surety bonds.

securities

Negotiable and non-negotiable

instruments or contracts

representing either money or

other property and includes:

tokens, tickets, revenue and

other stamps (whether

represented by actual stamps

or unused value in a meter) in

current use; and evidences of

debt issued in connection with

credit or charge cards, which

cards are not issued by the

insured.

self-insurers retention plan

bonds

A type of insurance program

bond that is commonly used as

an alternative when liability or

Workers Compensation

coverage is either prohibitive or

unavailable.

short-term bonds

Those covering fiduciaries

whose duties are to collect the

assets of the decedent, pay the

debts and distribute the

remainder according to law.

The terms of these fiduciaries

are usually brief (see "long-term

bond").

statutory bond

A term generally used

describing a bond given in

compliance with a statute. Such

a bond must carry whatever

liability the statute imposes on

the principal and the surety.

subcontract bond

One furnished by a

subcontractor, and required by

general contractors,

guaranteeing that the

subcontractor will faithfully

perform the subcontract in

accordance with its terms and

will pay bills for labor and

material incurred in performing

the subcontracted work.

subdivision bond

A surety bond that guarantees

that public improvements

related to commercial and

residential developments will be

completed properly and that all

financial obligations will be met.

These bonds are imposed by

the state and federal

governments.

subrogation

The legal process by which an

insurance company seeks from

a third party who may have

caused the loss, recovery of the

amount paid to the policyholder

or, in suretyship, to the obligee.

superseded suretyship rider

When a company writes a bond

that takes the place of another

that has been canceled as of

the effective date of the new

bond, a rider is normally

attached agreeing to pay

losses that would be

recoverable under the prior

bond except for the fact that the

"discovery period" has expired.

Losses caused by dishonest

employees frequently have

occurred at varying times over a

period of years which may

involve a succession of bonds,

each one superseding a prior

obligation.

supply bond

One that guarantees faithful

performance of a contract for

furnishing supplies or materials,

etc.

surety

A person or corporation

collaterally bound for the

payment of money or the

performance of an act or duty

by another.

Surety & Fidelity Association

Of America

An association composed of

leading insurance companies

that provide fidelity, surety and

forgery bon underwriting. It

establishes classifications of

risk, manual rates, minimum

premiums and rating plans;

creates standard forms,

provisions, riders and other

forms. It also collects and

analyzes statistical data; makes

filings with regulatory authorities

on behalf of its members and

subscribers, and performs other

functions on behalf of its

members and subscribers and

of their insureds.

surety bonds for outer

continental shelf leases

Surety bonds obtained by

companies that lease sites so

they can drill on the outer

continental shelf.

suretyship

The function of being a surety.

Stated in its simplest terms,

suretyship embraces all forms

of obligations to pay the debt or

answer for the default of

another.

TABC Bond

Surety bonds required the

Federal Government to ensure

the principal abides by the

governing rules and regulations.

The Texas Alcohol and

Beverage Commission Bond

guarantees that the principal

follows the government

regulations concerning the sale,

production and warehousing of

alcohol for both beverage and

non-beverage purposes.

talent agency bond

A bond issued to talent

agencies that protects the

consumer against fraud and

misrepresentation. Also called

a talent agent bond.

tax collector bond

This surety bond ensures the

performance of a tax collector. It

guarantees that the collector will

properly perform his duties in

the areas of billing, receipt and

deposit of funds, record

management, and receipt

reconciliation.

temporary administrator

bond

When a court appoints a

temporary administrator for a

given task, this bond ensures

that person's faithful

performance of his or her

duties.

term

A period of time for which a

bond or policy is issued.

theft

Any act of stealing.

Three Cs

The critical and traditional

underwriting considerations

made by all surety underwriters:

Character, Capacity and

Capital.

tobacco license bond

This bond must be obtained

before a seller can sell tobacco

products in the market.

tobacco tax bond

Also called a cigarette tax

bond, it guarantees that the

seller pays taxes on the sale of

tobacco to the government.

travel agents bond

A travel agent must obtain a

license from local authorities.

This bond guarantees financial

reimbursement to customers for

fraud or travel-related problems.

treasury limits

These are qualifying limits

imposed upon the surety by the

United States treasury

department. To be an

acceptable surety on bonds in

favor of the United States, the

surety must qualify financially

under regulations of the treasury

department. That department

annually issues a list of

companies so qualified, the

underwriting limit of each, the

states in which each is

licensed, and other data. The

underwriting limit is frequently

referred to as the "qualifying

power," which is equal to 10%

of the capital and surplus of the

surety.

treaty

Generally a reinsurance

contract between companies.

trustee

A trustee is an entity appointed

to manage a business' assets

and work with the business

creditors.

underwriter

Any individual or employee of

an insurance company who has

the responsibility of accepting

risks and determining in what

amounts.

used car dealer bond

(See motor vehicle dealer

bonds.)

U. S. Treasury Department

(See treasury limits.)

utility bond

Surety bond issued for work

performed by public utility

services. It is also known as

state forest utility bond.

wage and welfare bonds

Bond that guarantees payment

from union dues and other

benefits to the member of a

union. Each union has their own

application form. Also called a

union wage bond.

weigh master bond

Appointed by the City Fire

Department Chief, a weigh

master is a person whose

business it is to weigh ore, hay,

merchandise, etc., for the

public. This person has official

charge of the scales maintained

by a city and must weigh any

commodity requested by an

individual. The bond guarantees

that the weigh master faithfully

performs his duties.

welfare and pension plans

The Welfare and Pension Plans

Disclosure Act requires

disclosure and reporting of

financial and other information

concerning the operation of

employee benefit plans subject

to the act. Bonding is required

to protect benefit funds against

loss by acts of fraud or

dishonesty. The Employee

Retirement Income Security Act

of 1974 requires that fiduciaries

of private employee benefit

plans be bonded.

yacht and ship broker bond

This bond ensures against

deceit, fraud, or willful

negligence of a broker who

sells yachts or ships.