Obligee. It is the entity that would suffer from the damage caused by the other’s failure to comply.

Obligor or principal. This party agrees, usually as a condition for legal privilege such as being licensed in a particular profession.

Surety company. This entity provides the money for the bond when the obligor requires payment for damage caused by neglecting their obligation.

Decreased financial risk for projects and contracts

Minimized exposure to liability lawsuits

Increased assurance of completion on time and within budget

Assurance that work will adhere to specifications outlined by the obligee (client)

Protection from fraud, with penalties including fines up to $250k per violation AND imprisonment up to five years.

Bid bonds. They are used to guarantee that the contractor will be able to complete a construction contract.

Performance bonds. It’s there to protect you if your vendor doesn’t live up to his obligations and complete the job according to contract specifications.

Payment bonds. They ensure that the obligor will complete all work satisfactorily before any funds change hands between contractor and owner.

License and permit bonds. It protects consumers from the financial impact of an underperforming professional with a valid license or certification.

Employee theft bonds. They provide a financial guard against dishonest acts committed by people who can access property that belongs to their employers.