Webster’s: an obligation made binding by a money forfeit; also: the amount of the money guarantee b: one who acts as bail or surety c: an interest-bearing certificate of public or private indebtedness d: an insurance agreement pledging surety for financial loss caused to another by the act or default of a third person or by some contingency over which the third person may have no control.
Example: Let’s say that you that you have a $15,000 Errors and Omissions insurance policy and you accidentally misspelled a customer’s name when you were notarizing a document for a car purchase. Let’s say that the customer did not get the car due to your error. Let’s say that the car in this example is worth $18,000 and the customer sues you for $18,000. Your Errors and Omissions insurance may pay the limits of your policy (in this case $15,000) if you made an error or you omitted something by accident- like the accidental misspelling of your customer’s name. Keep in mind that you must make an error or an omission. Well, what about the remaining $3,000? To provide limited funds for paying claims against you, in this case, your bond may pay the remaining $3,000; however, unlike an insurance policy, you may be required to pay the bonding company back the $3,000.00. The $3K did not help you. It helped your customer-the public.
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(KS2-8212)