What are Surety Bonds?

The purpose of a surety bond is to protect public and private interests against financial loss.

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A Surety bond is a three-party agreement in which the issuer of the bond (the surety) joins with a second party (the principal) in guaranteeing to a third party (the obligee) the fulfillment of an obligation on the part of the principal. 

 

A common misconception is that surety bonds are insurance policies, but they are not.  When it comes to a surety bond claim, the principal is required to pay back the surety for all expenses including legal costs.  When a surety bond is issued, the surety is backing the principal with a bond that basically guarantees that the money will be there if any claim arises.  In a sense it is much like applying for credit in that the surety is promising to “lend” the principal a certain amount of money (in the event of a claim) and the principal is promising to pay that money back to the surety.

 

See the Surety Bonds we offer in Colorado.