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What is a Surety Bond?

What is a Surety Bond

A surety bond is a type of insurance. It differs from other types of insurance, such as home or car insurance which minimize risk in case of a loss. A surety bond is a “financial guarantee” that one party will fulfill their obligation. Most often, a surety bond will be required by law in cases where one party needs protection from financial losses and damages.

There are many types of surety bonds (see below). All have the same basic purpose, to protect the obligee from potential damages and financial losses.

A surety bond always involves three parties:

  • Principal—The party that has an obligation that must be guaranteed.
  • Obligee—The party requiring the bond.
  • Surety Broker—The party that ensures that the obligation will be paid if the principal will not.


The principal is the individual or company that must secure the surety bond. This may be done through their legal representation or on their own, though it is usually arranged through legal counsel.


The party that stands to realize financial loss or damages due to actions or inactions by the principal. The surety bond protects the obligee.

Surety Bond Broker

The surety broker is a form of insurance agent that works for a surety bond company. Surety bond companies work with insurance companies that back the bonds. The surety broker must get approval for the surety bond. For surety bonds that are high (for example >$1 million) the surety broker may need additional information and processing can take longer than smaller amounts.

How it Works

The principal or their legal counsel must acquire the correct form for the bond application. Many Illinois surety bond forms are available on the Madden & Bergstrom website.

Once the bond application is submitted to the surety bond broker, the broker will ensure all the required information has been supplied. If no further information is needed, the surety broker will execute the bond or decline the request if the principal is deemed unable to fulfill the obligation.

The bond will be sent to the principal or their legal counsel at which time it can be presented to the court if needed.

The bond remains in effect until the legal case closes or a predetermined expiration date passes.

If the obligee is awarded payment for financial loss or damages, the principal must make payment. In the event the principal cannot make the payment, the surety bond company will make the payment up to the amount of the surety bond.

If the principal cannot make payment, the surety bond company will seek reimbursement and may resort to legal means to do so.

Examples of Surety Bonds

Below are some of the most common surety bonds. There are many others. Please contact Madden & Bergstrom if you have questions about surety bonds not listed, or you need a surety bond in Illinois.

Certiorari Bond

Needed in a worker’s compensation appeal case. The bond amount will range from $1,000 to a maximum of $75,000. The bond guarantees that all costs of the appeal will be paid in full.

Administrator Bond

Needed when one dies intestate, or dies without a valid will. A court appointed administrator must carry out the responsibilities according to probate law. The amount of the bond needs to be 1.5 times the amount of the personal property plus the annual income from real estate.

Guardianship Bond

A court appointed guardian is needed in some instances for a minor or incapacitated adult. When a minor receives an inheritance or reaches a settlement, the guardian needs a bond to protect the minor’s assets. Minor settlements can be heard either in civil or probate court. If it is settled in probate court, the minor must be present for the judge to give a proper settlement amount.

The bond must be 1.5 times the settlement unless it is a structured settlement. If it is a structured settlement, then only the minimum bond of $1,000 is needed. If only one parent is the guardian, the other parent must be notified.

It is recommended that the lawyer goes to the bank to open the account in the minor’s name with the guardian.

When the guardian opens the account themselves, the higher the risk that the funds get misplaced. After the account is open, vouchers may be presented to the court with all withdrawals subject to further order of court.

Replevin Bond

Needed when personal property was wrongfully taken or held by a defendant. The plaintiff must give a five-day notice and summon the sheriff, or other officer, to retain the property.

Receiver’s Bond

Needed when the court appoints a receiver to avoid bankruptcy, or when a company needs help during their restructuring process. The bond secures the receiver’s obligation with the liquidation of the company’s assets.

Lost Securities Bond

Also known as a lost instrument bond. It is needed when a financial certificate is lost or stolen. Before the financial institution issues a replacement, they may require a lost note bond.

If the original document is found, the financial institution will not be liable for honoring the original document. Stock/ Real Estate Certificates, cashier’s checks, titles/ deeds, bonds, loan shares, or a life insurance policy may require a lost note bond.

Attachment Bond

A creditor may request to seize property from a debtor equal to the size of the debt. In this case the court may require the creditor to obtain an attachment bond.

Security of Cost Bond

Security for Cost is an order requiring a party to pay money for all court costs for their opposition. The bond protects the defendant, ensuring that they will be awarded their costs shall they win the case.

Refunding Bond

Needed when beneficiaries are requesting funds before the 6 month claims period of a probate estate. The bond is double the requested amount.

Injunction Bond

An order that prohibits a person or entity from doing a specific act. An improper restraint may cause a party to suffer damages. An injunction bond guarantees the person or entity will pay or perform specific acts to make the other party whole.

Notary Bond

Illinois requires all Notaries to obtain a surety bond which protects the public of Illinois against any financial loss due to improper conduct by an Illinois Notary.

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