Surety Bond Definition Explained
A surety bond is defined as a three-party agreement that legally binds together a principal who needs the bond, an obligee who requires the bond and a surety company that sells the bond. The bond guarantees the principal will act in accordance with certain laws. If the principal fails to perform in this manner, the bond will cover resulting damages or losses.
Although they often go unnoticed, surety bonds play a major role in countless industries across America. If you’re reading this article, you’ve probably heard about surety bonds but are still confused about their exact purpose. You’re not alone. Even those required by law to be bonded frequently misunderstand surety bonds.
Find Your Bond In Your State
There are over 50,000 types of surety bonds in the U.S. That’s a lot. And finding the exact bond you need can be difficult. Let us make it less difficult. Find your state below.
Almost all surety bonds are required at the state level and regulations can vary greatly from state to state.
In order to find a bond, first select your state.
Or, choose your state from the list below:
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- Washington D.C.
- West Virginia
Most Common Questions
Q: So, how do surety bonds work?A: Surety bonds provide financial guarantees that contracts and other business deals will be completed according to mutual terms. Surety bonds protect consumers and government entities from fraud and malpractice. When a principal breaks a bond's terms, the harmed party can make a claim on the bond to recover losses.
Q: Who's involved in surety bonds?A: Each surety bond that's issued acts as a three-party contract.
- The principal purchases the bond to guarantee the quality of work to be done in the future. This is usually a business owner or other professional.
- The obligee requires the principal to purchase a bond to avoid potential financial loss. This is usually a government agency.
- The surety issues the bond and financially guarantees the principal's capacity to perform a specific task. These are surety bond companies like SuretyBonds.com.