what is surety bond and how it works
- How Do Surety Bonds Work? To put it simply, they guarantee that specific tasks are fulfilled. This is achieved by bringing three parties together in a mutual, legally binding contract. The principal is the individual or business that purchases the bond to guarantee future work performance. The obligee is the entity that requires the bond. Obligees are typically government agencies working to regulate industries and reduce the likelihood of financial loss. The surety is the insurance company that backs the bond. The surety provides a line of credit in case the principal fails to fulfill the task. What is a Surety Bond? A Surety bond is a contract issued by an insurance company that provides a financial guarantee to an interested party (usually a government agency) that a named person or business will adhere to the terms established by the bond.