Surety Bond

A surety bond is a special type of “insurance-like” agreement among three parties. The insurance company is the surety, the party who guarantees the performance of the principal or obligor, which is the party that provides services to a third party called the obligee. Construction contractors are often required to purchase a surety bond to ensure their client receives the services they paid for (e.g., in case the construction company goes out of business during the job).

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