• All About Surety Bonds
  • What Are Surety Bonds
  • Surety Bond Types
  • Obtaining a Surety Bond
  • Cost of a Surety Bond
  • Bad Credit Surety Bond Program
  • Performance Surety Bonds
    • What are Performance Bonds
    • Performance Bond Requirements
    • Typical Performance Bond Costs
  • License Surety Bonds
  • Surety Bonds at Work
  • Importance of Surety Bonds
  • Ten things about Surety Bonds
  • The Miller Act
• Surety Bond Services
  • Services
  • Applications and Forms
  • Contact Us
  • About Us
• Commercial Surety Bonds
  • Court Bonds
    • Appeal Surety Bonds
    • Conservator Surety Bonds
    • Executor Surety Bonds
  • License & Permit Surety Bonds
    • Collection Agency Surety Bonds
    • Conduct Surety Bonds
    • Contractor License Surety Bonds
    • Cosmetology Surety Bonds
    • DMEPOS Surety Bonds
    • Driving School Surety Bonds
    • Health Club Surety Bonds
    • Liquor Surety Bonds
    • Mortgage Broker Surety Bonds
    • Mortgage Lender Surety Bonds
    • Motor Vehicle Dealer Surety Bonds
    • Pest Control Surety Bonds
  • ARC Surety Bonds
  • Farm Labor Surety Bonds
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  • Lease Guarantee Surety Bonds
  • Liquor Tax Surety Bonds
  • Lost Title Surety Bonds
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  • Sales Tax Surety Bonds
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  • Utility Deposit Surety Bonds
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• Contract Surety Bonds
  • Bid, Payment and Performance
  • Construction Surety Bonds
  • Subdivision Surety Bonds
  • Warranty Surety Bonds
• Fidelity Bonds
  • Business Services Fidelity Bonds
  • Dishonesty / Fidelity Bonds
  • Janitorial Services Fidelity Bonds

A Surety Bond is a generic term to describe many types of Bonds. A Surety Bond is a three party agreement. The three parties are:

• The Principal - the primary person or business entity who will be performing a contractual obligation
• The Obligee - the party who is the recipient of the obligation (usually a government entity)
• The Surety - who ensures (guarantees) that the principal's obligations will be performed. Sureties are similar to (sometimes divisions of) insurance companies.

Through this agreement, the Surety agrees to uphold - for the benefit of the obligee - the contractual obligations made by the principal if that principal fails to uphold its promises to the obligee. The Surety Bond is provided so as to induce the obligee to contract with (or license) the principal, i.e., to demonstrate the credibility of the principal and guarantee performance and completion per the terms of the agreement.

There are two main categories of Surety Bond types: Contract Surety Bond and Commercial Surety Bond. A Contract Surety Bond guarantees a specific contract. Examples include a Performance Surety Bond, Bid Surety Bond, Supply Surety Bond, Maintenance Surety Bond and a Subdivision Surety Bond. A Commercial Surety Bond guarantees per the terms of the Bond form rather than a contract.

Surety Bonds are frequently used in the Construction industry. In order to obtain a contract, the General Contractor must provide the Obligee (project owner) a Surety Bond for its performance of the terms as per the contract. Additionally, owners and Contractors may also provide a Payment Surety Bond to ensure that Subcontractors and suppliers are paid for work done. Under the Miller Act of 1935, a Payment and Performance Surety Bond is required for General Contractors on all U.S. Federal Government Construction projects where the contract price exceeds $100,000.00.

The Principal (Contractor, licensee, or permit applicant) will pay a premium, usually annually in exchange for the Surety Company's financial backing to extend Surety credit. In the event of a claim, the Surety will investigate prior to paying on the claim. If it turns out to be a valid claim, the Surety will pay the claim and then turn to the Principal for reimbursement in the amount paid out as well as any legal fees incurred in the process.