A surety bond is a written agreement to guarantee payment or performance of another company's obligation under a separate contract such as a construction contract.

Surety bonds are three party agreements among a principal (usually a general contractor), the surety or bonding company, and the obligee who is the recipient of the obligation (usually a building owner).

The surety contract is formed in order to induce or encourage the obligee (usually a building owner) to enter into a contract (such as a construction contract) with the principal (usually a general contractor). The principal must pay a premium in exchange for the surety company's guarantee.

Not all general contractors can qualify for a surety bond. Surety companies will evaluate the contractor's financial statements, FICO Score, legal history, and overall reputation in the industry before agreeing to provide a surety bond.

There are payment bonds, performance bonds, and bid bonds commonly offered by surety companies.

Bonds are also available for insurance brokers, mortgage brokers, escrow companies, and other professionals.

Contractors Bonds - Construction Bonds