In today’s environment, we see consistent increases in projects requiring surety guarantees. The ability to secure a bond and increase bond limits is a competitive necessity for our clients.
It is important to understand that Surety Bonds are not Insurance. Below, we explain the differences and define the three parties of a bond.
The Obligee requires the bond. Typically a lender or government entity, the Obligee requests the purchase of a bond to obtain a license or perform a service.
The Principle purchases the bond and agrees to perform work in accordance with the contract. The Principal is ultimately financially responsible.
A person or entity who takes responsibility for another’s performance. In the bond contract, the Surety company guarantees the work of the Principle (usually the contractor) and is liable for claims against the Principle up to the bond amount.