In finance, a surety, surety bond or guaranty involves a promise by one party to assume responsibility for the debt obligation of a borrower if that borrower defaults.

How does a surety work?

In simple terms, a surety bond is an agreement between three parties, while a traditional insurance policy is an agreement between two. A surety agreement involves the principal, the surety, and the obligee. In this arrangement, you (the business owner) are the principal, and the obligee is your client.

What does surety mean Legal?

Someone who assumes direct liability for another's obligation. Financial creditors may require the debtor to find a surety, who then signs the loan agreement along with the debtor.