What is a Surety Bond?

Have you heard you need a surety bond, but you’re not exactly sure what it is or what it entails?

Surety bonds are contracts guaranteeing that specific obligations will be fulfilled.  These obligations may involve meeting contractual commitments, paying debts or performing duties.  There are three parties in a surety bond:

  • Principal – Also referred to as the Obligor, this is the party who has initially agreed to fulfill the obligation, or the subject of the bond.
  • Obligee – This is the person or organization protected by the bond.
  • Guarantor or Surety – This is the insurance company issuing the bond.

Under the terms of a North Carolina Surety Bond, one party (Guarantor or Surety) becomes answerable to a third party (Obligee) for the acts or non-performance of a second party (Principal).

Common Types of Surety Bonds

There are a number of different kinds of surety bonds.

  • Bid Bond: A bond that guaranteeing that the successful bidder on a contract will enter into the contract and furnish the required payment and performance bonds.
  • Payment Bond: A bond that guaranteeing payment from the contractor of money to persons who furnish labor, materials, equipment, and/or supplies for use in the performance of the contract.
  • Performance Bond: A bond guaranteeing that the contractor will perform the contract in accordance with its terms.
  • NC Auto Dealer Bonds: This is required for any person or business wanting to establish and operate an auto dealership.
  • Permit Bonds: These are bonds that are often required in the construction industry to open building permits.
  • Employee Dishonesty Bonds: These bonds are meant to protect business owners from dishonest acts of your employees, such as theft.

If you think you might need a surety bond or have any questions about them, don’t hesitate to contact us.


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