Sometimes, as a business owner, you have to pay for things that you need for your business, but you may not have the money to immediately pay for the item. In that case, the person or company that you are working with may require you to get something called a surety bond. These bonds can be really confusing to just about anyone. So, what is exactly is a surety bond?
In its simplest, most basic form, a surety bond is a form of insurance that you pay. The insurance is for the person who is selling you the service or product that you need. Basically, the way that it works is that it's a contract between 3 people, the principal, the obligee, and the surety. So who are all those people?
The Principal: You are the principal. You are the one who is going to be paying off whatever it is, whether it's a service, product, or legal costs. You are responsible for every penny of that obligation, including any interest and fees that arise from the situation.
The Obligee: The obligee is the person who is requiring you to get the bond. They are the ones who will be out the money if you end up defaulting on payments. They require you to get the bond for their protection. If you can't pay, they will still be able to get the money because of the surety bond. There are a lot of people and agencies who will require you to get a surety bond, including the government. They do that so that they are able to protect their citizens from any debts.
The Surety: The surety is an insurance agency who specializes in surety bonds. You go to them and tell them what you need. They will offer the bond in the amount that you require. While they are writing the bond, they will also add in their fees and any legal costs that they are going to incur on your behalf.
If you have to pay for something or you have been hit with some legal fees, the person, agency, or company that you owe may require you to get a surety bond as a form of insurance. That way they will get the money that you owe them and you will be able to get what you need. If you have to get one, you want to make sure that you find an agency like NFP, P & C, Inc. that can work well for you.