What Is a Surety Bond? — powered by eHow.com

In the video above Roger Groh takes a shot at defining surety bonds.  In its simplest definition, a surety bond is a guarantee — usually a guarantee that a payment or job will be completed.

A surety bond is NOT insurance.  It differs from insurance in the fact that three parties are involved:

1. The Principal — the party that needs to be “bonded” and will be performing a contractual obligation.
2. The Obligee — the party requiring the bond of the principal to guarantee something and is the recipient of the obligation.
3. The Surety a.k.a. the bonding company, or carrier — ensures that the principal’s obligations will be carried out and provides the financial backing to make good on any claims that may transpire.

There are two major types, or categories of surety bonds: contract bonds and commercial bonds.  Many types of surety bonds exist within these two categories, but for our purposes — seniors in need of home remodeling — we’ll focus primarily on two kinds of contract surety bonds, namely payment and performance bonds.

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