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Surety Bonds

Surety bonds are similar to insurance, in that they are risk transfer method.  Unlike insurance, they involve three parties: Principal, Obligee and Surety Carrier.  Insurance only involves two parties: Insured and Insurer.

A surety bond is a guarantee for the principal’s obligations to the obligee (usually the principal’s customer).  In the event of a claim, the principal is financially liable, not the surety carrier.

The surety simply guarantees the principal and will require the principal to reimburse them if payments are ever made on their behalf.

Surety carriers underwrite based on financial strength, so they are more like a bank issuing credit, in some ways, than an insurance company.

Surety Obligee requiring the bond; Principal needing the bond; Surety company supplying bond Commitment by Principal Customer of the Principal (i.e. the Obligee) Principal is responsible for covering any claims
Insurance Consumer and Insurance company Coverage for losses Consumer buying the insurance Insurance company pays claims


Types of Surety Bonds

Surety bonds can be broken down into four main categories:

  • License & Permit – Auto Dealer, Contractor License, Freight Broker, Notary and many others
  • Construction Bonds – Performance, Supply, Payment, Bid bonds and many others
  • Commercial Bonds – Employee Theft, Janitorial Service, and many others
  • Court Bonds – Probate, Custodian, Executor and many others

At Pritchett-Moore, we have a deep understanding of bond structure. For many years we have guided our clients to a seamless process when it comes to surety. Let us be a part of your team, and facilitate the complex contract work for your bonded jobs.