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What is a Surety Bond?

Definition: sur•e•ty bond

A surety bond is a contract between three parties—the principal (you), the surety (us) and the obligee (the entity requiring the bond)—in which the surety financially guarantees to an obligee that the principal will act in accordance with the terms established by the bond.

What Bond Do I Need?

There are over 50,000 bonds in the U.S. and bond requirements, amounts and regulations are typically set at the state level.

To find out more about the bond you need, first select your state below! enter your zipcode below!

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.

  1. The principal is the individual or business that purchases the bond to guarantee future work performance.
  2. 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.
  3. 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.
The obligee can make a claim to recover losses if the principal does fail to fulfill the task. If the claim is valid, the insurance company will pay reparation that cannot exceed the bond amount. The underwriters will then expect the principal to reimburse them for any claims paid.

For a more in-depth definition of surety bonds, watch the video below to get a breakdown of the two major bond categories and examples of how surety bonds are used in industries today.

Learn More About the Most Popular Bond Types

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Have More Questions About Surety Bonds?

The experts at SuretyBonds.com are happy to answer any questions you have about the surety bond you need or how they work. Call 1 (800) 308-4358 Monday through Friday between 7 a.m. and 7 p.m. CST. You may also fill out an online contact form, and one of our experienced experts will call you as soon as possible. With SuretyBonds.com on your side, you don’t have to wonder, "What is a surety bond?" anymore.