In its most basic form, a surety bond is a written agreement that guarantees compliance, payment, or completion of an act. Surety bonds can have numerous variants in their definition, meaning, and function depending on the specific surety bail bond requirement. A surety is a unique insurance because it entails a three-party agreement.
These parties include:
Principle: The principal is the party who acquires the bond and agrees to perform an act as pledged.
Surety: This is the insurance or surety firm that guarantees that the commitment will be met. If the principal fails to complete the act as agreed, the surety is contractually obligated to make up the difference.
Obligee: It is the party that demands and frequently benefits from the surety bond. The obligee for most surety bonds is a local, state, or federal government institution.
Surety bonds come in thousands of forms across the country. Some surety bonds ensure compliance with licensing and permit criteria imposed by local, state, or federal governments. Other types of surety bonds ensure the payment of taxes or other financial obligations. These bonds are known as “strict financial guarantee” bonds. They are frequently more expensive due to the inherent risk of assuring a payment rather than a compliance requirement.