NHBA Insurance Agency, Inc.
WHAT IS A BOND?
A bond is a contract by which one party agrees to make good the default or debt of another. Actually, three parties are involved: the principal, who has primary responsibility to perform the obligation (after which the bond becomes void); the surety, the individual with the secondary responsibility of performing the obligation if the principal fails to perform. (After the surety performs, recourse is against the principal for reimbursement of expenses incurred by the surety in the performance of the obligation, known as surety's right of exoneration); and the obligee, to whom the right of performance (obligation) is owed.
TYPES OF BONDS
Appeal Bond – A bond filed with the court by a party against whom a judgment has been rendered, in order to stay execution of the judgment pending appeal to a higher court. The bond guarantees that the judgment will be satisfied if determined to be correct.
Court Bonds – A general term embracing all bonds and undertakings required of participants in a lawsuit permitting them to pursue certain remedies in the courts.
Fiduciary Bond – A bond required of administrators, executors, guardians, committees, etc. guaranteeing faithful performance of duty in accordance with the laws applicable to the position (See also Probate Bond).
Injunction – Defendant’s Bond to Dissolve – When an injunction has been issued, the court may order the injunction dissolved upon the giving of a bond. The bond is conditioned to pay damages the plaintiff may sustain as a result of the performance of the act or acts originally forbidden or ordered by the court if it is decided the injunction was proper. The defendant than may proceed as if the injunction never had been issued.
Injunction – Plaintiff’s Bond to Secure – An injunction is a judicial process whereby the defendant is required to perform or refrain from performing a particular act. An order granting an injunction may be conditioned upon the plaintiff furnishing a bond to indemnity the defendant against loss in case it finally is decided that the injunction should not have been granted.
Lost Instrument Bond – A bond given by the owner of a valuable security (stock, bond, promissory note, certified check, etc.) alleged to have been lost, stolen or destroyed. The bond protects the issuer of the security against loss which may result from the issuance of a duplicate security or, in some instances, payment of the cash value of the security.
Probate Bond – A bond, customarily filed in a probate court, that guarantees an honest accounting and faithful performance of duties by administrators, trustees, guardians, executors, and other fiduciaries (See also Fiduciary Bond).
Replevin – Plaintiff’s Bond to Secure – Replevin is an action to recover possession of specific articles of personal property. The Replevin Bond, which the plaintiff is required to furnish, is conditioned for the return of the property, if return is ordered, and for the payment of all costs and damages adjudged to the defendant.
Replevin – Defendant’s Bond to Recover Property Replevied – Where personal property has been replevied, the defendant may, by the furnishing of a bond, regain possession of the property pending final decision on the merits. The bond is conditioned for redelivery of the property to the plaintiff if ordered to do so or otherwise to comply with a court order or judgment.
Supersedeas Bond – A bond to supersede or take the place of a judgment. (See also Appeal Bond).
Q: Do you charge an annual renewal premium for administrator or executor bonds that are $25,000 or less?
A: No. These types of bonds are a one-time premium provided the bond amount stays at $25,000 or below.
Q: If the bond is canceled within the first year, will you return any unearned premium?
A: No, the first year’s premium on ALL bond types is fully earned and there is no refund.
Q: If the court enters an order fully restricting all the assets in a probate estate so that funds cannot be released without a court order, do you continue to charge a renewal premium for that bond?
A: No. Provided the bank provides a verification of restricted account for the full amount of the assets in the estate and the Bond penalty is reduced to $2,000 or less, no further premium will be charged as long as the full amount stays restricted and the reduction of the bond penalty remains in place. The principal may also receive a pro-rated return on the premium already paid depending on the date the funds were restricted.
Q: If I pay the renewal premium and the estate closes shortly after the renewal date, will I get any of that premium back?
A: Yes, to the extent the amount of premium attributable to that portion of the year that the bond is not needed exceeds the minimum premium of $100.
Q: Do you charge renewal premiums for court bonds other than probate?
Q. Do you require joint control? (This means that someone in addition to the fiduciary must approve the release of funds from the estate bank account).
A: We DO require joint control in conservator estates $25,000 and greater, and for Trustees’ bonds.
Q. Do you require collateral on bonds?
A: Only on court bonds other than probate and not on probate bonds unless the applicant fails to meet our underwriting standards.
Q: Do you check the credit history of the principal?
Q: What information do you need besides the application to make an underwriting decision?
A: It depends on the type of bond being written. Each application lists the additional documents that are needed in order to underwrite the bond. Generally, probate court bonds require only an application. The court bonds other than probate require the application, a current financial statement, a copy of the relevant pleadings and most likely, full collateral.
Q: Why do you require joint control or collateral, aren’t we buying an insurance policy?
A: No. A surety bond is not an insurance policy. A policy of insurance is designed to protect the insured against an unexpected loss. A surety bond, on the other hand, is designed to protect the obligee, which is the person or persons to whom the principal (the person being bonded) owes some duty or obligation. A person buys a bond because they have an agreement with a third party who requires a guarantee that the obligation will be fulfilled.
To find out more, please contact Sue Morand at email@example.com.