Business insurance
A surety bond is a guarantee involving a principal, an obligee and a surety; it is not interchangeable with liability insurance.
Understanding your options
A surety bond is a three-party guarantee of an obligation: the principal undertakes it, the obligee requires it, and the surety backs the bond subject to its terms. It is not the same as a liability policy protecting the business.
Coverage, eligibility, limits and exclusions depend on the insurer and policy. Review the actual policy documents before making a decision.
A closer look
Bid bonds, payment bonds and performance bonds serve different functions in construction. Other commercial bonds may respond to licensing or other obligations. The required form and obligee determine what to request.
The surety evaluates the principal and the obligation. Bond agreements can include indemnity provisions requiring the principal or other indemnitors to reimburse the surety; review the agreement before signing.
A bond does not replace a contractor's general liability, workers' compensation or project property coverage. Compare the contract's separate bond and insurance requirements.
Before you reach out
Common questions
The principal undertakes the obligation, the obligee receives the bond's protection, and the surety guarantees the obligation within the bond's terms.
Payment bonds address covered obligations to suppliers and subcontractors; performance bonds address completion of the covered contract. Specific terms and procedures matter.
No. They serve different purposes and have different parties and obligations. A contract may require both.
A bond application may include an indemnity agreement. Its actual terms determine the principal's obligations; review them carefully.
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