AFSB 151 2026 STUDY GUIDE
PRACTICE QUESTIONS DETAILED
SOLUTIONS
◉ Except in the case of a forfeiture bond, if the principal defaults the
surety will pay Answer: Up to the bond penalty, but no more than the
obligee's actual loss amount
◉ CB Construction entered into a construction contract with Lee
Properties. The contract required that CB Construction obtain a
performance bond, with Lee Properties named as the obligee.
Performance bonds guarantee that the obligee will be indemnified for
any loss resulting from the principal's failure to perform the work
Answer: According to the contract, plans, and specifications; at the
agreed price; and within the time allowed
◉ Which of the following groups, for the most part, serves the market
for fidelity and surety bonds in the United States? Answer: Multiline
property-casualty insurers
◉ Which one of the following is an example of a third-party beneficiary
on a given bond? Answer: An heir on a fiduciary executory bond
◉ Bonds under this classification guarantee that the principal will
properly account for and remit government funds collected as required.
Which license and permit bond classification is described? Answer: Tax
or fee bonds
,◉ The two basic types of surety bonds that are written today are
Answer: Contract surety bonds and commercial surety bonds
◉ A basic type of bond that involves all situations in which sureties
guarantee performance of obligations that generally do not arise from
contract is Answer: Commercial surety bonds
◉ When evaluating a surety claim, claims representatives are often
assisted by outside legal counsel. Which one of the following other
professionals often assist claims representatives? Answer: Engineers
◉ The surety bond three-party relationship, the party who guarantees
fulfillment of the obligation and who will either perform the obligation
or pay the costs for its fulfillment is the Answer: Surety
◉ Paul has the legal responsibility for the care for his brother, who is a
legally incompetent person, and for his brother's property. Paul is
required to obtain a bond that guarantees he will exercise his duties
faithfully and account for all property received. This bond is called
Answer: A fiduciary bond
◉ A person who commences an action against another to obtain an
equitable remedy may be required to post a bond before the court will
proceed with the action. This bond is called Answer: A plaintiff bond
,◉ Bonds for which the laws specify the bond conditions and for which
all three parties are dictated by the applicable law rather than the bond
provisions are Answer: Statutory bonds
◉ A surety bond is a written document in which one party guarantees a
second party's Answer: Performance to a third party for the second
party's failure to fulfill an obligation
◉ Unless the cosureties limit their respective liabilities in a bond, when
two or more cosureties execute a bond with the same principal, their
liability to the obligee is Answer: Joint and several
◉ A group that educates the general public, legislative bodies,
contractor associations, and others about the benefits of surety bonds is
Answer: The National Association of Surety Bond Producers (NASBP)
◉ A surety's liability for a surety bond can only cease to exist when the
underlying obligation/agreement has Answer: Been performed as
specified in the contract or when the bond has been canceled
◉ Because most bonds are "joint and several liability" documents, the
obligee can recover losses from Answer: The principal or the surety, or
from both
◉ The Miller Act was passed to require principals, in addition to
furnishing a performance bond, to furnish a separate payment bond
, guaranteeing payment of all bills incurred by the contractor Answer: For
labor and materials at the project completion for all federal jobs
◉ Judicial bonds Answer: Are a category of court bonds that arise out of
litigation and are posted by persons seeking or appealing a remedy in
court
◉ Bond losses occur when a fiduciary and its surety are held
accountable because the fiduciary did not exercise reasonable care in
notifying all heirs of an impending probate proceeding. This fiduciary is
called Answer: An administrator
◉ In accordance with a contract to build a county shed for the Village of
Malcolm, Raymone Construction purchases a contract surety bond from
SureRite Insurance. Identify the principal, obligee, and surety in this
suretyship. Answer: Principal- Raymone Construction; obligee- Village
of Malcolm; Surety- SureRite Insurance
◉ In an unlimited cosurety arrangement, the obligee can collect Answer:
The full loss from any of the cosureties up to the penal sum of the bond
◉ WP Hospitality hired Green Builders to build a new hotel. As part of
the contract, WP Hospitality required that Green Builders obtain a surety
bond to guarantee that it would pay all subcontractors for their labor and
materials. The payment bond was obtained from Blue Surety. Which one
of the following is a potential third-party beneficiary in this surety
relationship? Answer: Subcontractors
PRACTICE QUESTIONS DETAILED
SOLUTIONS
◉ Except in the case of a forfeiture bond, if the principal defaults the
surety will pay Answer: Up to the bond penalty, but no more than the
obligee's actual loss amount
◉ CB Construction entered into a construction contract with Lee
Properties. The contract required that CB Construction obtain a
performance bond, with Lee Properties named as the obligee.
Performance bonds guarantee that the obligee will be indemnified for
any loss resulting from the principal's failure to perform the work
Answer: According to the contract, plans, and specifications; at the
agreed price; and within the time allowed
◉ Which of the following groups, for the most part, serves the market
for fidelity and surety bonds in the United States? Answer: Multiline
property-casualty insurers
◉ Which one of the following is an example of a third-party beneficiary
on a given bond? Answer: An heir on a fiduciary executory bond
◉ Bonds under this classification guarantee that the principal will
properly account for and remit government funds collected as required.
Which license and permit bond classification is described? Answer: Tax
or fee bonds
,◉ The two basic types of surety bonds that are written today are
Answer: Contract surety bonds and commercial surety bonds
◉ A basic type of bond that involves all situations in which sureties
guarantee performance of obligations that generally do not arise from
contract is Answer: Commercial surety bonds
◉ When evaluating a surety claim, claims representatives are often
assisted by outside legal counsel. Which one of the following other
professionals often assist claims representatives? Answer: Engineers
◉ The surety bond three-party relationship, the party who guarantees
fulfillment of the obligation and who will either perform the obligation
or pay the costs for its fulfillment is the Answer: Surety
◉ Paul has the legal responsibility for the care for his brother, who is a
legally incompetent person, and for his brother's property. Paul is
required to obtain a bond that guarantees he will exercise his duties
faithfully and account for all property received. This bond is called
Answer: A fiduciary bond
◉ A person who commences an action against another to obtain an
equitable remedy may be required to post a bond before the court will
proceed with the action. This bond is called Answer: A plaintiff bond
,◉ Bonds for which the laws specify the bond conditions and for which
all three parties are dictated by the applicable law rather than the bond
provisions are Answer: Statutory bonds
◉ A surety bond is a written document in which one party guarantees a
second party's Answer: Performance to a third party for the second
party's failure to fulfill an obligation
◉ Unless the cosureties limit their respective liabilities in a bond, when
two or more cosureties execute a bond with the same principal, their
liability to the obligee is Answer: Joint and several
◉ A group that educates the general public, legislative bodies,
contractor associations, and others about the benefits of surety bonds is
Answer: The National Association of Surety Bond Producers (NASBP)
◉ A surety's liability for a surety bond can only cease to exist when the
underlying obligation/agreement has Answer: Been performed as
specified in the contract or when the bond has been canceled
◉ Because most bonds are "joint and several liability" documents, the
obligee can recover losses from Answer: The principal or the surety, or
from both
◉ The Miller Act was passed to require principals, in addition to
furnishing a performance bond, to furnish a separate payment bond
, guaranteeing payment of all bills incurred by the contractor Answer: For
labor and materials at the project completion for all federal jobs
◉ Judicial bonds Answer: Are a category of court bonds that arise out of
litigation and are posted by persons seeking or appealing a remedy in
court
◉ Bond losses occur when a fiduciary and its surety are held
accountable because the fiduciary did not exercise reasonable care in
notifying all heirs of an impending probate proceeding. This fiduciary is
called Answer: An administrator
◉ In accordance with a contract to build a county shed for the Village of
Malcolm, Raymone Construction purchases a contract surety bond from
SureRite Insurance. Identify the principal, obligee, and surety in this
suretyship. Answer: Principal- Raymone Construction; obligee- Village
of Malcolm; Surety- SureRite Insurance
◉ In an unlimited cosurety arrangement, the obligee can collect Answer:
The full loss from any of the cosureties up to the penal sum of the bond
◉ WP Hospitality hired Green Builders to build a new hotel. As part of
the contract, WP Hospitality required that Green Builders obtain a surety
bond to guarantee that it would pay all subcontractors for their labor and
materials. The payment bond was obtained from Blue Surety. Which one
of the following is a potential third-party beneficiary in this surety
relationship? Answer: Subcontractors
