Surety bonds are like an alternative to traditional insurance policies without actually being insurance policies. Commonly required by state and local jurisdictions, surety bonds assure customers that the work will be done according to professional standards. A surety bond involves the following parties:
Obligee who requires the bond
Surety (the bonding company issuing the bond, guaranteeing the work)
Principal or contractor
Unlike insurance claims, with surety bonds, you repay the surety company once customers win their claims. Bonds function as guarantees that homeowners and business owners can count on for professional work. They serve as financial protection for the party contracting the work. If the work doesn't meet professional standards, the owner is not required to pay.