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The Three Parties Involved In A Surety Bond
By admin | August 18, 2009
There are three parties involved in the issuance of surety bonds. The first party is the principal. This is the party that according to a contract will be performing an obligation. The second party is called the obligee, who receives the obligation according to the contract. The third party is the party that issues insurance to make sure the obligee receives what he contracted for from the principal.
The principal will usually pay an annual premium to the surety, a type of insurance, so that the obligee can feel secure that the contract will be carried out or will be covered by the surety. In order for the principal to get surety bonds, the company must have a good record and will be investigated not unlike a home purchaser. Naturally, the principal should have excellent credit.
A problem can arise if the surety company defaults. Then the obligee will not get paid. This does not usually happen because there are background checks and government regulation involved.
Think of it this way. If you are arrested and must post bail, your are the principal, the accused. You must put up some money to satisfy the obligee, which is the government, the bail bondsman is the surety. If you skip out the bail bondsman or surety is out money, because they must pay the remainder of the bail to the government, the obligee. The bail bondsman will try to track you down to recover the money.
Topics: Miscellaneous | 1 Comment »
January 10th, 2012 at 12:12 am
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