Surety Bonds

The Parties in a Surety Agreement


A surety bond can be required to start a business, take on a public construction project, or fulfill a court requirement. A surety bond is a three-party agreement between the principal, obligee, and surety. If the principal fails to perform in the manner agreed upon by the surety and the obligee, the surety bond will cover resulting losses and damages. When obtaining a surety bond, it is imperative to know who all three parties are in order to properly fill out your application and secure a bond.

Who is the Surety?

The surety is the insurance company who provides the surety bond for the protection of the obligee. The surety offers a financial guarantee to the obligee that the principal will fulfill their written obligation and uphold their duty. For example, a business must supply goods to a third party within a specific time frame. If the business, or the principal, does not fulfill these obligations, the obligee can file a claim insisting the surety satisfy the obligation or pay the bond penalty.

Who is the Obligee?

The obligee is the party requiring the principal to obtain a surety bond. They are usually government agencies, local municipalities, individuals, or companies. The surety bond safeguards the obligee from the failure of the principal to uphold their part of the agreement. For example, a payment bond protects the obligee should a contractor not pay their subcontractors or suppliers.

Who is the Principal?

The principal is the party being required to obtain the surety bond by the obligee. When filling out a surety bond application, you are the principal. The obligee requires the principal to obtain a surety bond to ensure they uphold their end of the agreement. For example, a contractor’s license bond protects the state’s contracting licensing board by ensuring the principal follows the rules and regulations set by their association.

Though the surety backs the bond, the principal is expected to sign an indemnity agreement. Indemnity agreements pledge your personal and corporate assets to reimburse the surety for any claims or legal costs and may arise.

Purchase Surety Bonds Online

With Colonial Surety, you can easily obtain your surety bonds online. You can fill out your application online in minutes! Click Here to get started.