Surety bonds protect consumers and government entities from fraud and malpractice by providing financial guarantees that business deals and contracts will be completed according to mutual terms. When a principal breaks a bond's terms, the harmed party can make a claim on the bond to recover losses.
Each surety bond issued acts as a three-party contract between a principal, and oblige and a surety:
A business owner or other professional purchases the bond to guarantee the quality of work to be done in the future.
Most of the time a government agency, requires the principal to purchase a bond to avoid potential financial loss.
A surety bond company, issues the bond and financially guarantees the principal's capacity to perform a specific task
Thousands of surety bonds exist, but some of the most utilized include:
Before contacting a surety provider, it is important to check all federal, state and local regulations regarding surety bonds in their respective industries. Regulations regarding a specific surety bond in California will vary from those that apply to a surety bond in Texas.