A Surety Bond is a basic term that describes a bond. Surety bonds are underwritten differently than insurance even though they are sometimes mistaken for insurance, when in fact a surety bonds are different.
A Surety Bond is essentially a guarantee. What exactly the bond guarantees depends on what language is written in the bond. With surety bonds there are always 3 parties involved.
The 3 parties involved are:
- The Principal – the primary business entity who will be performing a contractual obligation.
- The Oblige – the party who is the recipient of the obligation.
- The Surety – who ensures, guarantees the principal’s obligations will be performed. Sureties are similar to insurance companies.
This agreement says that the Surety agrees to uphold – for the benefit of the oblige – the contractual obligations made by the principal, if the principal shall fail to uphold their agreement with the oblige. Often consumers require a bond before they will agree to enter a contract with a contractor.
The 2 main categories of Surety Bonds:
- Contract Surety Bond
- Commercial Surety Bond
A Florida Contract Surety Bond guarantees a specific contract. A Florida Commercial Surety Bond guarantees the terms of the Bond form instead of a contract.
If you would like more information about bonds, please contact a licensed professional at South Lake Insurance at 352-429-3531