AFSB 151 FREQUENTLY TESTED ACTUAL EXAM
QUESTIONS WITH CORRECT ANSWERS
Question 1.
Surety bond
ANSWER
A written contract that expresses one party's promise to answer for another party's failure to do
something as promised.
Question 2.
Obligee
ANSWER
The party to a surety bond that receives the surety's guarantee that the principal will fulfill an
obligation or perform as promised.
Question 3.
Principal
ANSWER
The party to a surety bond whose obligation or performance the surety guarantees.
Question 4.
Surety
ANSWER
The party (usually an insurer) to a surety bond that guarantees to the oblige that the principal will
fulfill an obligation or perform as required by the underlying contract, permit, or law.
Question 5.
Contract surety bonds
ANSWER
A classification of bonds that guarantee the performance of the bonded contractor.
Question 6.
Commercial surety bonds
ANSWER
Bonds that guarantee the performance of all obligations that do not arise from contracts.
1
,Question 7.
Fidelity bonds
ANSWER
Bonds that historically have guaranteed the honesty of employees. Fidelity bonds have been replaced
by employee dishonesty coverage (insurance).
Question 8.
Performance bonds
ANSWER
A contract bond guaranteeing that a contractor's work will be completed according to plans and
specifications.
Question 9.
Public official bonds
ANSWER
A commercial surety bond guaranteeing that a public official will perform his or her duties faithfully
and honestly.
Question 10.
Payment bonds
ANSWER
A contract bond guaranteeing that the project will be free of liens.
Question 11.
Fiduciary bonds
ANSWER
A court bond guaranteeing that a person appointed by a court to administer the property or interest
of others will faithfully perform his or her duties.
Question 12.
mit bonds
ANSWER
entity) for loss or damage resulting from violations of the duties and obligations imposed on the
licensee or permit holder. (Statutory Bond meaning not cancellable)
2
,Question 13.
Common law
ANSWER
AKA Case law are laws that develop out of court decisions in particular cases and establish
precedents for future cases.
Question 14.
Statutory law
ANSWER
The formal laws, or statutes, enacted by federal, state, or local legislative bodies.
Question 15.
Statutory bonds
ANSWER
Bonds where the obligations of the three parties are dictated by the applicable law. Required by
municipal ordinance or a federal or state regulation or statue (written law).
Question 16.
Nonstatutory bonds
ANSWER
Bonds where the obligations are dictated by a contract between the principal and the oblige and by
the bond provisions.
Question 17.
Producer
ANSWER
Any of several kinds of insurance personnel who place insurance business with insurers and who
represent either insurers or insureds, or both.
Question 18.
Power of attorney
ANSWER
A written document that authorizes one person to act as another person's agent or attorney-in-fact.
3
, Question 19.
Execution of a bond
ANSWER
The establishment of the formal contract between the surety, principal, and oblige that is offered to
the principal.
Question 20.
National Association of Surety Bond Producers
ANSWER
An organization that educates the general public, legislative bodies, contractor associations, and
others about the benefits of surety bonds. (NASBP)
Question 21.
National Association of Independent Sureties ty Association of America
ANSWER
An organization that provides meetings and educational programs for surety underwriters. (NAIS)
member companies in gathering and analyzing statistical information, preparing regulatory filings
and publications, and engaging in representation in governmental affairs. (SFAA)
Question 22.
Underwriter responsibilities
ANSWER
-responsibility to the surety, producer, & client to access the sufficiency of the data presented for
making decision -responsibility to approve or deny coverage -includes undertaking risk, premium
coverage, conditions applicant should meet, & necessity for collateral to support the risk
Question 23.
Claims representative
ANSWER
Must protect the financial interests of the oblige while providing a duty of good faith to the bond
principal.
Question 24.
Joint and Several liability
ANSWER
Surety bonds have this kind of liability meaning the obligee can recover losses form either the
principal or the surety, or from both. Each are equally liable.
4
QUESTIONS WITH CORRECT ANSWERS
Question 1.
Surety bond
ANSWER
A written contract that expresses one party's promise to answer for another party's failure to do
something as promised.
Question 2.
Obligee
ANSWER
The party to a surety bond that receives the surety's guarantee that the principal will fulfill an
obligation or perform as promised.
Question 3.
Principal
ANSWER
The party to a surety bond whose obligation or performance the surety guarantees.
Question 4.
Surety
ANSWER
The party (usually an insurer) to a surety bond that guarantees to the oblige that the principal will
fulfill an obligation or perform as required by the underlying contract, permit, or law.
Question 5.
Contract surety bonds
ANSWER
A classification of bonds that guarantee the performance of the bonded contractor.
Question 6.
Commercial surety bonds
ANSWER
Bonds that guarantee the performance of all obligations that do not arise from contracts.
1
,Question 7.
Fidelity bonds
ANSWER
Bonds that historically have guaranteed the honesty of employees. Fidelity bonds have been replaced
by employee dishonesty coverage (insurance).
Question 8.
Performance bonds
ANSWER
A contract bond guaranteeing that a contractor's work will be completed according to plans and
specifications.
Question 9.
Public official bonds
ANSWER
A commercial surety bond guaranteeing that a public official will perform his or her duties faithfully
and honestly.
Question 10.
Payment bonds
ANSWER
A contract bond guaranteeing that the project will be free of liens.
Question 11.
Fiduciary bonds
ANSWER
A court bond guaranteeing that a person appointed by a court to administer the property or interest
of others will faithfully perform his or her duties.
Question 12.
mit bonds
ANSWER
entity) for loss or damage resulting from violations of the duties and obligations imposed on the
licensee or permit holder. (Statutory Bond meaning not cancellable)
2
,Question 13.
Common law
ANSWER
AKA Case law are laws that develop out of court decisions in particular cases and establish
precedents for future cases.
Question 14.
Statutory law
ANSWER
The formal laws, or statutes, enacted by federal, state, or local legislative bodies.
Question 15.
Statutory bonds
ANSWER
Bonds where the obligations of the three parties are dictated by the applicable law. Required by
municipal ordinance or a federal or state regulation or statue (written law).
Question 16.
Nonstatutory bonds
ANSWER
Bonds where the obligations are dictated by a contract between the principal and the oblige and by
the bond provisions.
Question 17.
Producer
ANSWER
Any of several kinds of insurance personnel who place insurance business with insurers and who
represent either insurers or insureds, or both.
Question 18.
Power of attorney
ANSWER
A written document that authorizes one person to act as another person's agent or attorney-in-fact.
3
, Question 19.
Execution of a bond
ANSWER
The establishment of the formal contract between the surety, principal, and oblige that is offered to
the principal.
Question 20.
National Association of Surety Bond Producers
ANSWER
An organization that educates the general public, legislative bodies, contractor associations, and
others about the benefits of surety bonds. (NASBP)
Question 21.
National Association of Independent Sureties ty Association of America
ANSWER
An organization that provides meetings and educational programs for surety underwriters. (NAIS)
member companies in gathering and analyzing statistical information, preparing regulatory filings
and publications, and engaging in representation in governmental affairs. (SFAA)
Question 22.
Underwriter responsibilities
ANSWER
-responsibility to the surety, producer, & client to access the sufficiency of the data presented for
making decision -responsibility to approve or deny coverage -includes undertaking risk, premium
coverage, conditions applicant should meet, & necessity for collateral to support the risk
Question 23.
Claims representative
ANSWER
Must protect the financial interests of the oblige while providing a duty of good faith to the bond
principal.
Question 24.
Joint and Several liability
ANSWER
Surety bonds have this kind of liability meaning the obligee can recover losses form either the
principal or the surety, or from both. Each are equally liable.
4
