Financial guarantee: it responds when someone fails to pay money. Under California Insurance Code §12100, financial guaranty insurance pays on proof of financial loss when an obligor or issuer of a debt instrument or other monetary obligation fails to pay when due because of financial default or insolvency. Example: a bond that pays holders if an insolvent issuer misses its interest payments.

California keeps this apart from surety insurance. Section 105(d) says financial guaranty coverage may not be written as surety insurance. Surety insurance under §105 includes guaranteeing the performance of contracts and guaranteeing the behavior of persons.

Faithful performance: the bond guarantees that a person will faithfully carry out the duties of a position. A public official bond is the classic case. Under Government Code §1501, the condition of an official bond is that the principal will well, truly and faithfully perform all official duties then required by law, plus additional duties imposed by any existing law or one enacted after the bond was executed. So it is not limited to the duties in place on the day it was signed.

Sorting practice: - A builder must complete a project under its contract → contract bond. - A county treasurer must faithfully perform official duties → faithful performance bond. - An insolvent issuer fails to pay a debt obligation when due → financial guarantee. The word performance appears in both a performance bond and a faithful performance bond, so ask whether a contract or a person's duties is being guaranteed.