What is a surety bond?
If you’ve ever felt frustrated trying to figure out what precisely a surety bond is, don’t worry — you’re not alone. Surety bonds are confusing if you don’t already know what they are. We can help you break it down.
First, don’t think of surety bonds as a type of insurance. There are similarities, but the two aren’t the same.
A surety bond is a contract between three parties: the principal, the surety, and the obligee.
- Principal — this is most likely your role in a surety bond. Principals are the people required to meet or fulfill the terms of the contract.
- Obligee – an obligee is the party or group requiring the surety bond. They want to know you, the principal, will do the work you claim you can.
- Surety — the group acting as the surety carries the responsibility of guaranteeing the contract’s terms are met.
Ultimately, a surety bond gives obligees a guarantee that the principal will complete the work or meet the statutes they are requiring. It may help to think of the surety as someone who is guaranteeing you fulfill your bonded obligation.
Who needs surety bonds?
Generally, if you need a surety bond, you will be informed of the requirement along with any specific conditions the bond must meet. However, there are people and groups who will always require a surety bond. These people and groups may include:
- Anyone applying for a license with their city or state
- Construction companies working for government entities
As professionals in the field of surety bonds, we make it our business to know you and your concerns. We spend time learning and listening to better serve you, our clients. Contact us today!