What is a surety bond in business?

A surety bond is a three-party agreement where the surety guarantees to a project owner (obligee) that the principal (your business) will fulfill contractual obligations.

A surety bond is a financial agreement between three parties: the principal (your business), the obligee (the entity requiring the bond), and the surety (the company guaranteeing the bond). It ensures the principal fulfills their obligations, such as completing a project or complying with regulations.

A contractor secures a performance bond to guarantee the completion of a construction project. If they fail, the surety ensures the project is completed.

Identify the type of bond required for your business by consulting with clients, regulators, or an insurance broker.