A surety bond is a contract between at least three parties. The first party (the principal) makes contractual promises to a second party (the obligee). In the event the principal defaults on the terms of the contract, the third party (the surety) pays the obligee for determined by the contract up to the maximum amount specified in the surety contract.
The premium paid by the principal for this surety credit is dependent on the risk to the surety organization and the principal's ability to perform within the terms of the contract.
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Sample uses of a surety bond
Learn more from our commercial insurance infosheet.