What’s a Surety Bond?

Essentially, a surety bond is a bond that’s meant to guarantee performance undeterred by a certain risk. It’s an agreement between three parties: the Principal, the Obligee, and the Surety. Who’s who? Let’s break it down:

• The Principal is the person who needs the bond
• The Obligee is the person whom the bond protects, and is typically the person who requires the Principal to obtain the bond.
• The Surety is the individual who issues the bond to the Principal.

If the Principal cannot fulfill his/her end of the bargain, the Surety will ensure that the Obligee is properly compensated. This doesn’t let the Principal off the hook, however—the Surety will pursue the Principal for reimbursement for the amount compensated to the Obligee.