Question 1

WHAT DOES A SURETY BOND DO?

Accepted Answer

A surety bond guarantees that a principal (the bond purchaser or licensee) will fulfill an obligation

Question 2

WHO CAN BE BONDED UNDER A SURETY BOND?

Accepted Answer

Any individual, partnership, corporation or limited liability company which meets the requirements of the surety company can be bonded.

Question 3

WHO BENEFITS FROM A SURETY BOND?

Accepted Answer

The party that purchased the bond, called the principal, and the party that requires the bond, called the obligee, share the benefits of having the guarantee of a financially strong third party, the surety.

Question 4

WHAT KIND OF OBLIGATIONS CAN BE BONDED?

Accepted Answer

Nearly any type of obligation can be bonded. The most common obligations are performance of a service or duty, compliance to state code, and/or payment of a sum of money, for one purpose or another.

Question 5

IS A SURETY BOND THE SAME AS INSURANCE?

Accepted Answer

A surety bond is never considered to be insurance. 
A surety bond is an extension of credit in the form of a guarantee.

Question 6

IS A SURETY COMPANY LIKE  BANK?

Accepted Answer

A surety company operates very much like a bank, but it is controlled and regulated by state insurance departments.

Question 7

WHO CAN MAKE A CLAIM AGAINST A BOND?

Accepted Answer

Usually only the obligee can make a claim under the bond.  The principal can never make a claim against his/her bond.

Question 8

WHAT HAPPENS IF A SURETY COMPANY HAS TO PAY A CLAIM?

Accepted Answer

A principal is legally obligated to reimburse the surety company for any loss and expense incurred by the surety to satisfy the claim.  The principal's obligation to the surety can therefore be greater than the original obligation to the obligee, which is the bond amount. The surety has the same recourse against the principal as any other creditor would have in recovering their loss.

Question 9

WHAT WOULD CREATE A CLAIM UNDER A SURETY BOND?

Accepted Answer

The principal's inability to fulfill his/her obligation would create a claim against a surety.

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