According to Wikipedia, a surety bond or surety is a promise by a surety or guarantor to pay one party (the obligee) a certain amount if a second party (the principal) fails to meet some obligation, such as fulfilling the terms of a contract. The surety bond protects the obligee against losses resulting from the principal’s failure to meet the obligation.

The NASBP – NATIONAL ASSOCIATION OF SURETY BOND PRODUCERS a surety bond is a promise to be liable for the debt, default, or failure of another. It is a three-party contract by which one party (the surety) guarantees the performance or obligations of a second party (the principal) to a third party (the obligee).

There are two broad categories of surety bonds:

(1) contract surety bonds; and

(2) commercial (also called miscellaneous) surety bonds.

Watch this short video to better understand what a surety bond is and how it works.