AFSB cheat sheet

A fidelity bond guarantees employee honesty: the surety reimburses the insured for dishonest acts of covered employees, up to the bond limit.

Commercial crime coverage is written on a discovery basis: it covers loss discovered during the policy period, even if the dishonest act occurred earlier, subject to any retroactive date.

Standard insuring agreements include employee theft, forgery or alteration, inside-premises theft, computer fraud, funds transfer fraud, and money orders or counterfeit currency.

Employee theft covers theft of money, securities, or other property by an employee acting alone or in collusion; a series of related acts by one person is usually treated as one loss.

Forgery or alteration covers forged checks, drafts, promissory notes, and similar instruments; it generally does not cover credit card misuse or forged securities.

Computer fraud covers theft resulting from unauthorized access to or fraudulent instructions into a computer system; funds transfer fraud covers fraudulent instructions to a financial institution.

Limits may be per occurrence, per employee, or aggregate; the deductible applies to each single loss, and related acts are aggregated for limit and deductible purposes.

Name schedule bonds list covered individuals with stated limits; position schedule bonds cover whomever occupies a listed position; blanket bonds cover all employees subject to exclusions.

ERISA requires a fidelity bond for employee benefit plans, generally at least 10% of plan assets, subject to a statutory minimum and maximum.

A bid bond guarantees the bidder will execute the contract and furnish required performance and payment bonds; its penalty is often 5% to 10% of the bid.

A performance bond guarantees completion of the contract according to its terms; the penal sum is commonly 100% of the contract price, though it may be a different stated amount.

A payment bond guarantees payment to subcontractors, laborers, and suppliers; federal Miller Act projects above the statutory threshold require both performance and payment bonds.

A maintenance bond covers defective workmanship or materials discovered during a stated period after acceptance; it does not cover routine wear and tear or unrelated damage.

Contract surety underwriting evaluates character, capacity, and capital, plus work-in-progress, backlog, financial statements, and the contractor's ability to complete bonded work.

A general indemnity agreement obligates the principal and indemnitors to reimburse the surety and gives the surety subrogation rights against responsible parties.

The bonded contract amount and penal sum can be increased by change orders only with surety consent or endorsement; the surety's liability is capped by the penal sum.

Surety premium is a service fee based on contract price and rate, not an insurance loss fund; the surety expects no loss and relies on principal completion.

The surety's obligation is secondary and conditional; the principal remains primarily liable to the obligee for performance.

Commercial non-contract surety bonds guarantee a principal's performance of a legal, regulatory, or contractual obligation to an obligee other than a construction owner.

License and permit bonds guarantee compliance with statutes, ordinances, or permit conditions and often payment of taxes, fees, or assessments.

Fiduciary bonds cover executors, administrators, guardians, and trustees; the court sets the penal sum to protect estate or trust assets.

Judicial bonds include appeal, attachment, injunction, replevin, and bail bonds; they protect parties against loss from litigation-related remedies.

An appeal bond stays enforcement of a judgment pending appeal; its penal sum typically includes the judgment plus costs and interest.

Public official bonds guarantee faithful performance of duties by elected or appointed officials and protect the government entity from dishonesty or default.

Lost instrument bonds indemnify issuers or transfer agents for replacing lost securities and protect against later claims by the original holder.

Commercial surety bonds are often continuous until canceled; the surety must give the obligee notice of cancellation, and the penal sum is the maximum liability.

Court bonds often require collateral or indemnity because the surety's risk depends on unpredictable litigation outcomes and the principal's financial strength.