How Does a Surety Bond Work?

SO JUST EXACTLY HOW DOES A SURETY BOND WORK?

Surety bonds are an insurance policy for the obligee or the entity that is initiating the project. In most situations, the obligee is a government agency, and the bond is in place to ensure the government is protected. Surety bonds operate as a form of insurance to the obligee, since the obligee is the beneficiary that can file a claim if the bond’s obligation is not met.

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OBLIGEE

This is the entity, often times a government agency, that is requiring the bond

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PRINCIPLE

This is the contractor or subcontractor that needs to get bonded

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SURETY

This is a third party bonding company that provides and backs the bonds

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