Surety
The company that guarantees a contractor's obligations under a bond.
What it means
A surety is the company — usually an insurance company — that issues a bond guaranteeing one party's obligations to another: in construction, the contractor's performance or payment obligations. Suretyship is a three-party arrangement: the principal (the contractor), the obligee (whoever the bond protects), and the surety. Unlike an insurer, a surety expects to be repaid — contractors sign indemnity agreements requiring them to reimburse the surety for claims it pays, often backed by personal guarantees.
Why it matters before you sign
A bond is not insurance for the contractor who buys it — every dollar the surety pays out usually comes back to the contractor through the indemnity agreement.
In a contract, it looks like this
The surety approved the GC for a $5 million bonding line after reviewing its financials and requiring the owners' personal indemnity.
This definition is a general, educational explanation — not legal advice. XOsign provides AI-assisted document tools and does not provide legal advice; consider consulting a qualified attorney for guidance on your specific situation. Requirements vary by state.
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