Court bonds are a type of surety bond that must be filed with the court responsible for ruling on a court proceeding. Court bonds consist of two primary categories - (1) probate bonds required of court appointed fiduciaries responsible for managing the estate of a deceased or incompetent person; and (2) civil court bonds required of the defendant or plaintiff in a civil court proceeding.
Court bonds protect the court by transferring to a surety bond company the cost of ensuring the beneficiary of an estate or the counterparty to a civil court action is compensated for damages resulting from the Principal, the person required to purchase the bond, failing to perform or adhere to a court ruling. The surety company provides the court a guarantee (the surety bond) that a damaged party will receive payment for financial damages due to a violation of the court order up to a limit specified in the bond (“penal sum” or “bond amount”). Ultimately, the bond Principals are responsible for their actions and required by law to reimburse the surety company for any payments made under the bond. Court bonds refer to the person required to purchase the bond as the Principal, the surety bond company as the Obligor and the court as the Obligee.
Common examples of violations triggering a bond payout include an administrator to the estate of a deceased person using estate assets for her own benefit or a losing party in an appeal case failing to pay a judgment.
Court bonds usually cost between 0.5% to 2% of the bond amount, but the cost of a specific court bond depends on the type of bond needed. Civil Court bonds cost 2% of the bond amount, but the cost is typically reduced if cash collateral is required. Probate bond rates are determined using a sliding scale based on the bond amount, providing a volume discount for larger bond amounts.
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Credit checks are required for probate bonds with bond amounts greater than $25,000. Credit checks are not typically required for civil court bonds. Ultimately, the surety insurance company determines how it will underwrite and price a surety bond.
We categorize court bonds into two unique categories - (1) Probate Bonds required of court appointed fiduciaries responsible for managing the estate of a deceased or incompetent person; and (2) Civil Court Bonds required of the defendant or plaintiff in a civil court proceeding.
Below is a link to more information on court bonds your client’s will need help with:
Suretypedia groups Court Bonds into 2 unique categories, primarily by industry and sub-industry. Below is a link to more information on each bond category: