Reference
Surety bond glossary.
The words that show up on a bond, an application, or an underwriter's email, in plain English. Written for California contractors and businesses.
- A.M. Best rating
- A financial-strength grade for insurers and sureties. Obligees on public and larger private work often require an A-rated surety. We place your bond with strong, admitted markets.
- Administrator bond
- The probate bond filed by a court-appointed administrator, which is the personal representative of an estate where there was no will or no executor able to serve. Same instrument as an executor bond; the name reflects how the appointment arose.
- Probate bonds
- Aggregate limit
- The total amount of bonded work a surety will back for you at one time, across all open projects. Together with the single limit, it defines your bonding capacity.
- Bonding capacity
- Appellate bond
- Another name for an appeal bond, also called a supersedeas bond. Filed by the party appealing a money judgment: it stays enforcement while the appeal is heard and guarantees the judgment is paid if it stands. Usually requires collateral, because the amount is already fixed by a court.
- Appeal bonds
- Bid bond
- A contract bond that guarantees you will honor your bid and furnish the performance and payment bonds if you win. Usually carries no separate premium as part of your program.
- Bid bonds
- Blocked account
- A deposit account holding estate cash or securities that can only be withdrawn on a court order. Because the representative cannot reach the funds, Prob. Code §8483 lets the court reduce the bond accordingly, which is usually the cheapest way to cut a probate bond premium.
- Probate bond cost
- BMC-84
- The FMCSA form for the $75,000 surety bond a freight broker or freight forwarder files to hold operating authority. The broker pays an annual premium rather than posting the full amount, and reimburses the surety for any claim it pays.
- Freight broker bonds
- BMC-85
- The trust-fund alternative to a BMC-84: the broker ties up the full $75,000 rather than paying a premium. Since January 2026 the assets must liquidate to cash within seven calendar days, and loan and finance companies can no longer serve as trustees.
- BMC-84 vs BMC-85
- Bond amount (penal sum)
- The face amount of the bond, the most a valid claim can pay out. It is not what you pay. Your cost is the premium, a percentage of this figure.
- Bonding capacity
- How much bonded work a surety will support for you, expressed as a single-job limit and an aggregate limit. Set from your financials, experience, and track record.
- Surety bonding capacity
- Bonding rate
- The premium expressed as a percentage of the bond amount rather than as a dollar figure. A $25,000 bond written at 2% is a $500 annual premium. The rate is set by underwriting, and on license and commercial bonds personal credit is the largest single input.
- What a surety bond costs
- CA DOI
- The California Department of Insurance, which licenses surety bond brokers. MM Bonding holds CA DOI License #6009105.
- Cancellation
- Ending a bond before its term is up. Many bonds are non-cancelable or refund on a prorated basis, and license bonds usually require notice to the obligee. Terms vary by bond.
- Refunds & cancellations
- Claim
- A demand for payment under a bond, made by the obligee or a protected party. If the surety pays a valid claim, you reimburse the surety under your indemnity agreement.
- Claims & lapses
- Collateral
- Security a surety may require on a higher-risk file, such as cash or an irrevocable letter of credit, held against potential loss and released when the risk clears.
- Surety bond collateral
- Commercial bond
- A broad category of non-contract surety bonds required by a government agency or by contract, such as license, permit, notary, and court bonds.
- Commercial & specialty bonds
- Compliance bond
- A bond guaranteeing the principal will comply with a specific statute, ordinance, or permit condition. Most compliance bonds are license and permit bonds under a different name: the obligee's own form controls what is actually guaranteed, so read the form rather than the label.
- Commercial & specialty bonds
- Contract bond
- A surety bond tied to a specific construction contract: bid, performance, and payment bonds. Guarantees the job and the payment of subs and suppliers.
- Contract bonds
- Contractor license bond
- The $25,000 surety bond every CSLB-licensed California contractor must carry under BPC §7071.6. Protects consumers and employees, not the contractor.
- Contractor license bond
- Cost of recovery
- An amount added on top of the estate's value when a court sets a guardianship or conservatorship bond, covering the attorney's fees and costs of collecting on the bond. It is why those bonds are always larger than the assets they protect.
- Guardianship bonds
- Court (judicial) bond
- A bond a court requires in a legal proceeding, such as a probate, guardianship, conservatorship, or appeal bond, guaranteeing a party performs a court-ordered duty.
- Court & probate bonds
- CSLB
- The Contractors State License Board, California's licensing authority for contractors. It sets license requirements and receives the contractor license bond on Form 13b-1.
- Disciplinary bond
- A bond the CSLB Registrar requires to reinstate a license after a disciplinary action. At least $25,000, up to ten times the license bond, held for at least two years.
- Disciplinary bond
- Drawdown
- A payment out of a broker's financial security to settle a claim, reducing it below the $75,000 the FMCSA requires. The surety must report it within two business days, and the broker has roughly seven days from FMCSA's notice to replenish before its authority is suspended.
- Freight broker bonds
- Executor bond
- The probate bond filed by an executor named in a will. Identical in substance to an administrator bond and to what sureties call a fiduciary bond. Not required where the will waives bond, unless the court orders one anyway.
- Probate bonds
- Fidelity bond
- Coverage that protects a business against loss from employee dishonesty or theft. Unlike most surety bonds, it protects the bondholder rather than a third party.
- Fidelity bonds
- Fiduciary bond
- The surety industry's umbrella term for a bond guaranteeing someone entrusted with another party's money acts faithfully. In California probate it means the personal representative's bond; it also covers guardians and conservators, which are sized under a different rule.
- Probate and fiduciary bonds
- Funds control
- A neutral third party that disburses a job's funds to labor and suppliers as work progresses. It lowers the surety's risk and can unlock a bond a file couldn't get alone.
- Funds control
- Indemnitor
- A person or company that signs the indemnity agreement and is responsible for reimbursing the surety. Business owners and sometimes their spouses sign as indemnitors.
- Indemnity agreement
- The contract you sign with the surety agreeing to reimburse it for any valid claim it pays. Owners typically sign a personal guarantee as indemnitors.
- Indemnity agreement, explained
- Letters testamentary
- The court document proving a personal representative's authority to act for an estate. It is what the bond gates: under Prob. Code §8480, if the required bond is not given, letters do not issue, so no bond means no authority to move estate assets.
- Probate bonds
- License bond
- A bond required to hold a license, guaranteeing you follow the laws that govern your trade. The contractor license bond is the best-known California example.
- Contractor license bond
- Obligee
- The party a bond protects and who can make a claim, such as the CSLB, a project owner, or a government agency. One of the three parties to every surety bond.
- Payment bond
- A contract bond that guarantees subcontractors, laborers, and suppliers get paid. Usually issued alongside a performance bond on public and larger private work.
- Payment bonds
- Performance bond
- A contract bond that guarantees the project owner you will complete the work per the contract. If you default, the surety ensures completion, up to the bond amount.
- Performance bonds
- Permit bond
- A bond a city, county, or agency requires to pull a permit, guaranteeing you meet the permit's conditions, such as restoring the public right-of-way after the work.
- Permit bond requirements
- Personal representative
- The Probate Code's collective term for whoever administers a decedent's estate, whether an executor named in a will, a court-appointed administrator, or a special administrator. The bond is filed in this person's name, and must match the court's spelling of it exactly.
- Probate bonds
- Power of attorney
- The document a surety attaches to a bond authorizing the attorney-in-fact who signed it to bind the company, up to a stated amount. An obligee checks that it is attached, current, and large enough to cover the penal sum. A bond presented without one cannot be verified.
- Verifying a bond is real
- Principal
- The party who buys the bond and must perform the underlying obligation, that is, you, the contractor or business. One of the three parties to a surety bond.
- Professional surety
- A corporate surety in the business of writing bonds, as distinct from a personal surety, an individual pledging their own assets. Courts and public obligees generally require a professional surety that is admitted in the state, and for federal work, Treasury-listed.
- Rider
- An amendment to an existing bond, used to change the bond amount, the name, or another term without issuing a brand-new bond.
- Security bond
- Not a distinct product. The phrase is used loosely for any bond posted as security for an obligation: a permit bond standing in for a cash deposit, a subdivision improvement bond, a court bond. Which bond you actually need is set by the obligee's form, not by the word.
- Signature bond
- A criminal-court release on the defendant's written promise to appear, with no collateral posted and no surety company involved. It is a bail term rather than a surety product. MM Bonding places commercial and contract surety bonds, and does not place bail or immigration bonds.
- Soft vs. hard credit pull
- Most surety quotes use a soft credit pull, which does not affect your score. A hard pull, which can, is rarely needed for standard license bonds.
- How credit checks work
- Surety
- The company that backs the bond and pays valid claims, then seeks reimbursement from you. The third party, alongside the principal and the obligee.
- Surety bond
- A three-party guarantee among the principal, the obligee, and the surety. It protects the obligee and the public, not the principal, and you repay any valid claim.
- How surety bonds work
- T-listing (Treasury listed)
- A surety approved by the U.S. Treasury (listed in Circular 570) with a set underwriting limit. Federal contracts require a Treasury-listed surety.
- Transfer bond
- Most often a bonded title: a bond filed when a vehicle's title is missing or defective, so ownership can be transferred and a new title issued. The term is also used in customs for goods moved in bond between ports, which is an unrelated product.
- Bonded titles in California
- Underwriting
- How a surety evaluates your bond: reviewing credit, experience, and financials to set approval, price, and any conditions. It applies to every bond.
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