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
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.