The Differences of Surety vs. Fidelity Bonds

On May 18th, 2006 the Surety Association of America (abbreviated SAA) officially changed their name to The Surety and Fidelity Association of America, or the SFAA. This is significant despite the fact that the association has always been involved in both surety and fidelity bonds. The SFAA has noticed the confusion feel it is necessary to clarify that there is in fact a difference between the two.It is widely assumed that fidelity bonds are in fact a surety bond. This is assumption is exacerbated by the fact that agencies that offer surety bonds also offer fidelity bonds. To further the confusiuon there is a vast number of surety bonds helping to contribute to this misunderstanding.To clarify, lets look at the definition of what a surety bond is: A surety bond is a three party agreement involving a principal (the person or entity that will be performing the contractual obligation), an obligee (the person or entity that will be receiving the obligation), and the surety (the organization that ensures that the principle will perform all obligations of the contract). For more information on surety bonds, their types, and uses, visit this faq http://www.bryantsuretybonds.com/faq.htmIn short, the surety is guaranteeing that the contractor will perform all duties of the contract on time and to it's full standards. Should this not occur, the surety will see the project to the end and compensate for any losses. One thing to be very clear of is that traditional underwriting of surety bonds is done with the intention of a 0 loss ratio. The purposes of surety bonds are to allow individual or companies to bid/work without having any of their assets frozen in the bank (irrevocable letter of credit). On the other hand the definition of a fidelity bonds is as follows: A fidelity bond is a form of protection that covers “the bonded” (policyholders) for any losses that they may incur as a result of fraudulent acts by specified individuals. It usually insures a business for losses caused by the dishonest or criminal acts of its employees. While bond may be in the name, this obligation is actually an insurance policy to protect an employer. Also with Fidelity Bonds there are only two parties, the principle and the carrier.Hopefully this name change, along with the articles and press releases it has spurred, brings clarity to those who are in the market for either surety or fidelity bonds. For more information on this topic visit http://www.bryantsuretybonds.com/

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