What is a surety bond ?

A surety bond is an unsecured loan designed to protect the obligee. A surety bond has three different parties written into the bond form. Party one is the Obligee meaning obligator; they are the party that is requiring the principal to carrier the bond. The second party of a bond is the principal. The Principal is the party that is required to obtain the bond. The third party involved in the bond is the surety bonding company. The surety company is the entity that will be backing the bond.
“The surety agrees to uphold the contract specified in the bond form for the benefit of the obligee. If the principal fails to uphold its obligations to the obligee the surety will on behalf of the principal. Once the surety bonding company does that the principal must reimburse the surety for any expense that has occurred.
In general Bonds are required by the state, city court or local government. Normally surety bonds are required to obtain a license or a permit. There are many different types of surety bonds. State obligee’s can require them for car dealers to sell cars, contractors to build buildings as well as mortgage brokers to write loans. Bonds that are not required by the government are called private obligee’s A private obligee can be any one an example of a private obligee would be a utility company require a client to obtain a utility bond to wave a security deposit
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