A surety bond is a contract that ensures specific obligations are met. These bonds are often required for contractors working on government contracts. They are performance-based. A surety bond is a guarantee between three parties. The parties in a surety bond are:
Should the Principal fail to meet their obligations when performing contracted work, the correct type of surety bond pays the Obligee, and the Principal must then reimburse the Surety company.
Surety bonds come in several types, each providing protection for the Obligee. These include:
These surety bonds are put in place to guarantee a contractor (the Principal) performs the work as contracted. How the bond is written will vary based on the type of contract. Contract surety bonds vary in cost and reflect the contractor’s financial condition, credit score, work history, and other factors. These bonds come in four basic types:
These bonds may be required for licensed businesses performing government work. These bonds are usually a requirement for specific businesses, including those that sell alcohol, car dealers, license contractors, notaries, and other licensed professionals in various industries. Several types of commercial surety bonds exist, including:
If you are required to put a surety bond in place, contact our local agent to help you find the correct type of bond for your purpose at a reasonable rate.