If you are a contractor (of any industry), you’ll promise clients that you’ll finish their work according to their stipulations. Contracts are not stipulations to take lightly. They are legally-binding. Yet, you can’t eliminate the possibility that a project will go awry. Many businesses turn to Surety Bonds to help in case of project defaults. Surety bonds fall under the umbrella of consumer protection. They function like an insurance policy. If you make a contract with a client, a surety bond functions as a guarantee that you will do the work accordingly. 

Surety bonds involve three parties:

  • The Principal: The person, company or entity carrying the bond. If you are the contractor, you'll have a bond in your name,
  • The Obligee: This is the individual who benefits from a bond. It’s usually the party who you work with under a contract. They will be the one to make a claim on a bond if necessary.
  • The Surety: The company that issues and maintains the bond. The principal pays the surety a premium to maintain the bond. In some cases, the bonding company will pay a settlement to the obligee initially. The principal must still compensate the bond company, however.


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