Additional Questions

Question 1 of 60

When a bondsman receives a Power of Attorney from a Surety, the bondsman has the ability to do all of the following, EXCEPT:

The bond agent has the authority to write bonds for the surety company.
The bond agent has the authority to sign documents on behalf of the surety.
The bond agent has the authority to act on behalf of the surety.
The bond agent has the authority to set the bond fee and rate.

Question 2 of 60

The surety includes a power of attorney on a bond. The Obligee (the one protected) should verify all of the following on the bond, EXCEPT:

The signature of the bondsman with the power of attorney.
The signature of an officer of the surety granting the power of attorney.
Effective date of the bonds and any premiums or fees.
The renewal date of the power of attorney.

Question 3 of 60

An attorney secures an attachment bond for a contractor. In order to remove the bond on the contractor, the surety needs

A request by the principal
A request by the attorney
A request by the insurance commissioner
A statement from the court that requested the bond

Question 4 of 60

A Replevin Bond is used to

Give a cash award to a defendant should an appeal not be won.
Pay the plaintiff should property not be given by the appellant.
Guarantee property to the court to help pay court costs.
Pay an appellant if the defendant does not return previously received property.

Question 5 of 60

Which of the following can a fiduciary (guardian) NOT do?

Use funds for emergency travel.
Use funds to set up education for children of a trust.
Use funds so ordered by the court.
Use funds to open up an investment accounts.

Question 6 of 60

The total limit of liability for payment from the surety company to all claimants is called the __________.

Capital sum
Principal sum
Bond fee
Penal sum

Question 7 of 60

A blanket fidelity bond covers which of the following?

All unintentional torts.
All employees, should an honest error occur.
All employees, but only for those identified by name on the bond.
All employees for dishonest acts while acting alone or by collusion with another employee.

Question 8 of 60

Which of the following is an INCORRECT statement regarding a blanket position fidelity bond?

Blanket Position Bonds are bonds which protect an employer from loss due to dishonest acts of employees.
The bond is issued for a fixed amount and each position (rather than individual) is covered for this amount.
The premium for this bond is based on the total number of employees, so an increase in employees will increase the premium on the bond.
The premium for this bond is based on the financial strength of the company (obligee) and not the number of employees.

Question 9 of 60

A deli has only one employee and the employee has access to the cash register. The deli owner wants to make sure that he would be indemnified should the employee steal any money. You should recommend a __________.

Performance bond
Position bond
Blanket cash bond
Individual bond

Question 10 of 60

A bid bond guarantees

That a supplier will give the right material at the agreed price.
That a company who loses a bid will have his costs reimbursed.
That the best deal was made for both the owner and the builder.
That if the bidder defaults, the bond penalty will be paid to the obligee to cover losses and expenses for a rebid, including the loss if the rebid is higher than the original bid.

Question 11 of 60

The obligations under a surety bond can be all of the following, EXCEPT:

Contractual
Statutory
By Court Order
Ambiguous

Question 12 of 60

Which of the following is NOT a part of the 3 C’s of underwriting?

Character of the principal
Capacity of the principal to complete the job
Capital or financial strength of the principal
Collateral of the principal

Question 13 of 60

Where can a person find out which Surety companies writes Federal Surety Bonds?

State of Washington Commissioner
National Surety Association
Attorney General Publication
Federal Register

Question 14 of 60

A plaintiff wins a suit against the defendant. A judgment is awarded to the plaintiff, however, the defendant appeals the court decision and is required to post a supersedeas bond. The bond guarantees

That the Mariners will win the World Series.
That the plaintiff will show up for court.
That the plaintiff will pay any judgments and court costs.
That the defendant will pay any judgments and court costs should he lose his appeal.

Question 15 of 60

If the principal defaults, the surety pays the obligee, but then the surety has the right to recover its bond penalty (penal amount). This process is known as __________.

Insurance Indemnification
Consideration
Enumeration
Subrogation

Question 16 of 60

A surety agent is told by the surety company that she will need a signed legal document before she can write any bonds on their behalf. The legal form they are talking about is the __________.

Insurance policy
Certificate of authority
Indemnity agreement
Power of attorney

Question 17 of 60

Mr. X is arrested for alleged assault and needs a bail bond to be released from confinement. How is the bond amount determined by the court?

By good will of the court.
By financial condition of Mr. X.
By the number of children Mr. X is responsible for.
By the likelihood of Mr. X fleeing and the severity of the crime.

Question 18 of 60

Which of the following explanations about fiduciary bonds and probate bonds are correct?

A Fiduciary Bond is available for administrators and executors of estates (may be called a Probate Bond).
Guardians may need to be bonded because they are often appointed by courts to handle the affairs of people who are incapable of doing so for themselves.
Fiduciary bonds are also issued to receivers in bankruptcy cases and to various trustees.
All of these statement are correct about people who may need to secure a probate or fiduciary bond.

Question 19 of 60

If a judicial court appoints an executor to handle the distribution of an estate, the executor will be required to secure a Probate bond. The premiums paid and expenses incurred by the executor for such bond __________

are not includable as an expense for handling the estate.
are recoverable from the state where the individual died.
are fully recoverable from the surety company who issued the probate bond.
are fully recoverable as expenses for handling the estate.

Question 20 of 60

The XYZ Bank purchased a Blanket Fidelity bond of $100,000 to cover all of their employees. It is discovered that three of the employees dishonestly took $50,000 each from the bank. How much will the bond pay to the bank for this loss?

$50,000
$150,000
$300,000
$100,000

Question 21 of 60

A private employer has 200 employees and wants them covered for different amounts depending on their position with the company. The employer does not need as much coverage on employees in the stock room as they do on cashiers. You should recommend a:

Bail bond to get the employee out of jail when they get caught.
Named Scheduled bond.
Fiduciary bond.
Blanket Position bond.

Question 22 of 60

A building contractor might be unable to complete a project if expected electrical or plumbing supplies did not arrive. A default on the building contract might trigger payment under the bond of the contractor, and the surety would then seek recovery from the contractor. If the contractor had a __________ __________ from the supplier, the losses and expenses of the contractor would be paid by this bond.

Completion bond
Performance bond
Fidelity bond
Supply bond

Question 23 of 60

An individual does not come back for his scheduled hearing and bail bond is forfeited. The surety company:

Must pay the bond amount to the principal and subrogate against the obligee for recovery.
Must pay and may not seek any reimbursement for the payment.
Will pay but will pass any loss to the family of the bonded individual.
Will pay the bond penalty to the obligee and subrogate against the principal for recovery of the penalty paid.

Question 24 of 60

Which of the follow does not represent the characteristic of a surety bond?

A bond is a three party contract.
A surety anticipates no losses when issuing a bond.
A bond promises to indemnify the obligee for certain losses.
A bond can be in force by a binder given by the bondsman.

Question 25 of 60

There are specific terms of every construction contract. Which of the following would NOT be a term or standard for surety underwriting of a Contract Bond?

Expected time of completion of the construction.
Supplies needed for completion of the construction.
Penalties for failure to meet construction deadlines.
Arbitration and appraisal conditions for construction property damage.

Question 26 of 60

A construction company was required to post a Bid Bond before bidding on the construction of a new municipal building. The company secured a $50,000 bid bond in favor of the municipality, the owner of the building. The party that underwrites the bond is called the __________.

Principal
Obligee
Municipality
Surety (guarantor)

Question 27 of 60

A construction company was required to post a Bid Bond before bidding on the construction of a new municipal building. The company secured a $50,000 bid bond in favor of the municipality, the owner of the building. The municipality is called the__________.

Surety
Principal
Indemnitor
Obligee

Question 28 of 60

A construction company was required to post a Bid Bond before bidding on the construction of a new municipal building. The company secured a $50,000 bid bond in favor of the municipality, the owner of the building. The construction company is called the __________.

Obligee
Surety
Insured
Principal

Question 29 of 60

A private employer has 200 employees but wants to cover only five particular employees and for five different limits of coverage. The employees have different jobs and responsibilities and pose different financial threat to the company. You should recommend a:

Blanket Position bond.
Schedule Position bond.
Public Employee bond.
Name Scheduled bond.

Question 30 of 60

A construction company was required to post a Bid Bond before bidding on the construction of a new municipal building. The company secured a $50,000 bid bond in favor of the municipality, the owner of the building. The Bid Bonds will:

Guarantee that if the bidder is awarded the contract the bidder will actually sign and accept the contract.
Guarantee that if the bidder is awarded the contract the bidder will secure a performance bond.
List the bond penalty for failure of the construction company to perform.
All three of these are correct statements regarding a bid bond.

Question 31 of 60

Bid Bonds guarantee that if the bidder is awarded the contract, two things will occur: one, the bidder will actually sign and accept the contract, and two, a performance bond will be issued. Which of the following is INCORRECT if the successful bidder defaults on either account.

The obligee may use as much of the bid bond penalty as necessary to cover resulting losses and expenses.
The obligee may use part of the bond penalty to pay the extra expenses incurred if a project must be rebid.
The obligee may use part of the bond penalty for expenses if the job must be awarded to the next highest bidder.
The obligee may use part of the bond penalty for attorney fees to sue the principal for indemnification.

Question 32 of 60

When two or more individuals guarantee a surety obligation it is often called __________.

Multiple Indemnitor
Dos Locos
Special Surety
Co-sureties or Dual-sureties

Question 33 of 60

Bonds for financial institutions provide broad coverage for multiple exposures and are similar to that provided by a commercial crime policy. One bond might be used to cover the dishonest acts of employees. However, this bond will NOT cover:

The employee who embezzles money from the company.
The two co-workers who steal building supplies from the company.
The employee who forges a company’s business check.
The employee who makes an error in the profit and loss statement of the company.

Question 34 of 60

A contractor is awarded a building contract for a school. The contractor will usually be required to provide a performance bond (a type of contract bond). The performance bond guarantees the obligee that the work will be completed in accordance with the contract. The contractor is __________.

the surety
the obligee may use part of the bond penalty to pay the extra expenses incurred if a project must be rebid.
the insured
the principal

Question 35 of 60

A contractor is awarded a building contract for a school. The contractor will usually be required to provide a performance bond (a type of contract bond). The performance bond guarantees the school that the work will be completed in accordance with the contract. The school is the __________.

Principal
Surety
Insured
Obligee

Question 36 of 60

A contractor is awarded a building contract for a school. The contractor will usually be required to provide a performance bond (a type of contract bond). The performance bond guarantees the school that the work will be completed in accordance with the contract. If the contractor defaults:

The school must sue for indemnification.
The contractor must file a claim in court for the execution of the bond.
The contractor might be placed into receivership.
The surety will be responsible for completing the work or paying damages to the school.

Question 37 of 60

A/an __________ bond guarantees that the plaintiff (the principal) will pay court costs and any damages to the defendant if the plaintiff loses the case.

Appeal
Bail
Injunction
Cost

Question 38 of 60

A plaintiff may seek an injunction against another party, but the courts require that an injunction bond be furnished before granting the injunction. An injunction bond __________.

Guarantees to pay damages to the court if it is later decided that the injunction should not have been issued.
Guarantees to pay all court costs should the principal default.
Guarantees that the defendant will appear in court.
Guarantees that damages to a defendant will be paid if it is later decided that the injunction should not have been issued.

Question 39 of 60

Which of the following is an INCORRECT statement regarding a Fiduciary bond?

Fiduciary Bonds guarantee that a fiduciary will faithfully perform duties and act in the best interests of the person being represented.
A fiduciary is someone who has a legal right to handle the affairs of others.
Fiduciary bonds are available for administrators and executors of estates.
Guardians may need to be bonded because they are often appointed by courts to handle the affairs of the poor who are covered under the Medicaid program.

Question 40 of 60

A bid bond guarantees that the principal, a construction company, will sign and accept the contract if awarded the bid and __________.

Secure financing for employee wages.
Enroll all employees under the workers compensation program.
Ensure that the bidding was equitable for all bidders.
Secure a performance bond.

Question 41 of 60

A manufacturing business has two employees who have access to company funds. One employee works on a cash register and the other is the accountant. The business purchases a name scheduled bond in the penalty amount of $50,000. The cashier leaves after stealing $25,000 and the accountant embezzled another $75,000 a week later. How much total payment can the business expect to receive from the surety company for these two dishonest acts?

$50,000
$100,000
$0, because dishonest acts are not covered under fidelity bonds.
$75,000

Question 42 of 60

A manufacturing business has two employees who have access to company funds. One employee works on a cash register and the other is the accountant. The employer wants to be reimbursed for loss due to the dishonest acts of these employees. The business purchases a name scheduled bond in the penalty amount of $50,000. Which of the following is INCORRECT?

The guarantor is the surety company.
The principal is the employee.
The obligee is the business.
The bond is probably a surety bond paid by the employee.

Question 43 of 60

Which of the following bonds may be required by state statutes?

Judicial bonds
License bonds
Permit bonds
All of these bonds could be required by state statutes

Question 44 of 60

When an individual (obligee) has a company (principal) provide a surety bond, the individual requires it to:

Protect itself from bodily injury caused by the company.
Provide indemnification against property losses due to fire.
Provide indemnification to the surety if the obligee defaults.
Provide indemnification upon nonperformance of the principal.

Question 45 of 60

In which situations might a judicial court require an executor or a guardian to secure a Probate or Fiduciary bond?

A state gives the probate courts jurisdiction over settling an estate to a guardian or executor.
A state gives a probate courts jurisdiction over settling an estate of juveniles, the court appoints a guardian.
A state gives a probate courts jurisdiction over settling estates of person determined unable to take proper care of their property or themselves, the court appoints a guardian.
All of these circumstances could require a Probate Bond or Fiduciary Bond.

Question 46 of 60

Surety bonds are generally designed to __________.

Protect and defend the rights of a defendant.
Eliminate the need for surety agents and bondsmen.
Verify that the principal meets all statutory requirements.
Minimize or eliminate the potential losses of an obligee.

Question 47 of 60

Under our legal system, certain types of privileges are available only when a bond has been furnished. Judicial bonds fall into two broad categories; court or litigation bonds, and fiduciary bonds. Which of the following is a type of litigation bond?

Bail bonds
Cost bonds and Appeal bonds
Attachment bonds and Injunction bonds
All of these are types of litigation or court bonds

Question 48 of 60

A general indemnity agreement of a bond will list all of the following, EXCEPT:

The right of subrogation.
The principal must reimburse the surety.
Terms of the indemnity agreement.
Duty to defend the principal should the obligee sue for default.

Question 49 of 60

A deli has only one employee and the employee has access to the cash register. The deli owner purchases a bond to make sure that he would be indemnified should the employee steal any money. Which of the following is INCORRECT?

The deli owner is the obligee.
The employee is the principal.
The bond purchased was a fidelity bond.
The bond premium was paid by the principal.

Question 50 of 60

Which of the following is an INCORRECT statement regarding the indemnity agreement of a bond?

A separate indemnity agreement may be issued for each bond.
The parties enter into a general indemnity agreement covering any bonds that the surety may issue to that contractor.
The indemnitors agree that they will indemnify (completely reimburse) the surety for any liabilities, attorney fees, expenses, or damages.
The indemnity agreement is required to be in all surety contracts.

Question 51 of 60

Which of the following is a correct statement regarding an indemnity agreement?

A surety that pays the debts or obligations of its principal is entitled to indemnification by the principal.
The indemnitors of a bond could be the contractor and individuals who have pledged their assets to support the bonds.
The indemnitors agree that they will indemnify the surety for damages the surety may incur as a result of its issuance of a bond to the principal.
All of these are correct statements.

Question 52 of 60

Which of the following is an INCORRECT statement regarding surety bonds?

Surety bonds ordinarily do not terminate until the principal has fulfilled its obligation.
Since the fulfillment of an obligation may take only a few days or as long as many years, surety bonds are not issued as a year-to-year contract.
Normally bond contracts do not allow either the surety or the principal to cancel them.
Surety bonds are issued for a maximum of one year, but are guaranteed to renew for several years.

Question 53 of 60

A/an __________ bond guarantees that the judgment will be paid if affirmed and that the costs of the appeal will also be paid.

Cost
Attachment
Legal
Appeal

Question 54 of 60

Which of the following must be present for a bond to be a legal contract?

Each party must have financial solvency.
Each party agrees to defend the other in court cases.
Each party must be of high moral character.
Each party must be competent.

Question 55 of 60

A construction company has a contract bond needed for construction on a building. When the obligee fails to make payment for work completed by a building contractor (the principal) according to their contract, the __________.

Surety agrees to pay the principal.
Surety will loan the money necessary to keep them both happy.
Surety will sue the obligee for the principal.
Surety and the principal are released from their obligation under the bond.

Question 56 of 60

Because of default of a contractor to perform under a building contract, the surety company finds it necessary to pay the bond penalty. To recover (subrogate) money paid to the obligee, including the additional expenses and court costs, the surety action will be detailed in the __________.

Surety agreement
Hold harmless agreement
Right to defer clause
General indemnity agreement

Question 57 of 60

The written indemnity agreement:

Confirms the surety will pay the bond penalty but will pay for all other expenses itself.
Confirms that the indemnitors are responsible for only the penal sum, and no more.
Confirms the maximum amount of liability for the sum of all losses to a business.
Confirms the principal’s obligation and extends the obligation to all the indemnitors.

Question 58 of 60

The surety is responsible for paying to the obligee on default of the principal. The amount paid could be called the __________.

Penal amount
Bond penalty
Bond face amount
All of these are correct terms

Question 59 of 60

The basic difference between a Fidelity bond and a Surety bond is:

Fidelity bonds reimburse the plaintiffs for the dishonest actions of the obligee, while surety indemnifies the insured.
Fidelity bonds pay a fixed amount for losses of the principal, while surety bonds indemnify for the full amount of the loss.
There is no difference; they are both types of contract bonds.
Fidelity bonds reimburse the obligee for the dishonest actions of the principal, while surety bonds indemnify the obligee for lack of performance of the principal.

Question 60 of 60

The XYZ company is required to supply a Performance bond before any work can begin at the construction site. What might the surety require from the company before agreeing to a bond?

A property policy from the Travelers insurance company.
A fixed date of completion of the construction site.
The number of employees who will be working at the site.
That the principal (obligor) provide collateral security for the bond.

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