What Surety Bond Do?

A surety bond is a promise to be liable for the debt, default, or failure of another. It is a three-party contract by which one party (the surety) guarantees the performance or obligations of a second party (the principal) to a third party (the obligee).

What is the purpose of surety bond?

Surety bonds are financial instruments that tie the principal, the obligee—often a government entity—and the surety. In the case of surety bonds, the surety is providing a line of credit to the principal so as to reassure the obligee that the principal will fulfill their side of the agreement.

What is surety bond and how does it work?

A surety bond is not a typical insurance policy. While the Surety backs the performance of the principal and will pay the penalties resulting from non-performance or under-performance, they do seek to reclaim the funds from the principal. A Surety bond helps make the deal happen.