A surety bond is a legally binding contract that ensures obligations will be met between three parties: (1) The Principal: the individual or business that purchases the bond and agrees to fulfill certain obligations. (2) The Surety: typically an insurance company, which guarantees the principal can perform the task. (3) The Obligee: the party who is the recipient of an obligation, usually a government entity, which requires the bond and would be protected if the principal fails to meet their obligations. A surety bond provides financial assurance that the principal will behave in a specified manner, such as fulfilling a contract, performing duties in a trustworthy manner, or complying with certain laws. If the principal fails in their obligation, the surety company can be called upon to cover the losses incurred by the obligee.