What Is A Surety Bond?

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If you’re wondering what a surety bond is, you’ve come to the right place. SuretyBonds.com

has developed this guide to give you a quick and easy to understand explanation of surety

bonds. I’m Danielle, and I’ll be explaining what surety bonds are, how they work and who

needs them.

A basic definition explains that a surety bond brings three parties together in a legally

binding agreement. These three parties are known as the principal, obligee, and surety.

First, we have the principal, which is the professional or business that much purchase

the bond. When a principal purchases the bond they provide a financial guarantee and prove

their ability to follow certain laws and regulations. Second, we have the obligee which is the party

that requires the principal to purchase the bond. The obligee is usually a government

agency that uses surety bonds to regulate an industry and protect consumers from financial

loss. Finally we have the surety, which is the insurance company that guarantees the

bond. The surety provides a financial guarantee that the principal will fulfill the bonds

obligations. If the bonded principal doesn’t fulfill the bond’s terms, the the obligee

can make a claim against the bond to collect reparation for damages. If the claim is found

to be valid, the surety will reimburse the obligee.

Now that you know how bonds work, you’re probably wondering, who needs a surety bond

and why? Surety bonds are typically required of businesses or professionals who provide

services to consumers. Often times, bonds are used to regulate traditionally risky markets,

such as the mortgage industry.

Most surety bonds fall in one of two major bonding categories: commercial bonds or contract

bonds. Commercial bonds are for business owners, entrepreneurs, and other working professionals.

Commercial bonds ensure people will do their job according to licensing laws and other

industry regulations. A few examples include auto dealers, notaries and travel agents.

Contract bonds are used to guarantee that construction professional will fulfill their

contractual obligations when working on a construction project. Contract bonds ensure

projects are completed on time and keep project owners from losing their investments. So what

do you do if you need a surety bond? If you need more information on a specific bond type

visit suretybonds.com. If you’re looking to purchase a surety bond, suretybonds.com

offers free, no obligation quotes within one business day.