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What are Surety Bonds? Explained with Examples

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Hey there!

If you are wondering WHAT a Surety Bond is, WHO are involved in it, and HOW they work,

then you’re at the right place!

So what is a Surety Bond?

Surety Bond, in its simplest sense, is a promise by a surety that a specific task is completed

to the terms of a contract or in line with laws and regulations.

Who requires a Surety Bond?

Most often, surety bonds are required by a government agency, regulation department,

state or federal court, or general contractor as a form of protection.

It also serves as a form of protection for consumers.

Who are the parties involved in obtaining a surety bond?

What makes surety bonds unique is that they always have 3 Parties, specifically:

The Obligee; The Principal;

The Surety.

1st Party: The Obligee.

The Obligee is the person or company requiring the bond.

It is also the entity that is protected by the bond.

2nd Party: The Principal.

The Principal is the person or company purchasing the bond and promising to adhere to the terms

of the bond.

Usually, the Principal must perform a task OR refrain from doing a certain activity.


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