Surety Bond is a guarantee where the Surety (Insurance company) guarantees the Principal (contractor/vendor/supplier) to work under terms of conditions agreed by Obligee (owner/beneficiary).

Surety Bond is an additional agreement over master agreement (contract/agreement) between Principal and Obligee that states if the Principal could not fulfill the obligations to the Obligee therefore the Surety will pay the Obligee the loss with maximum of Surety Bond's value.

In Surety Bond, when the Surety pays the loss in cash to the Obligee for any request of claim settlement, the Principal according to Indemnity Agreement will return the same amount to the Surety.

All parties involve in the Surety Bond are:
• Principal is the contractor that legally has the work from the owner (Obligee) and needs a guarantee from the Surety.
  1. In Construction Contract Bond, the Principal is the property contractor;
  2. In Supply Contract Bond, The Principal is the goods supplier;
  3. In Customs Bond, the Principal is the importer that is charged with import duty
• Obligee is the project owner that authorizes the project work to the Principal required a guarantee from third party (Surety). Obligee could be an individual, a company, government institution or other.
• Surety is the general insurance company that issues the Surety Bond as requested from the Principal to guarantee the payment to the Obligee if the Principal is failed to finish the work under the contract between Principal and Obligee.