The main type of bonds on the market today are known as surety bonds. These bonds are required by anyone who administers public or private funds, or for individuals or businesses that require licenses or permits in order to operate in their trade, profession, or business. This includes a long list of licensed trades people, agents, and others who are in a regulated profession or business.
These bonds can be viewed as like a third party contract. An insurance company or bonding company acts as the guarantor or surety for one individual or business. This individual or company then performs a service and is known as the obligee. They assume the responsibilities of liabilities of a third party that is known as the principal.
To give an example of how this works, say a taxi cab company wants to open a business in Sun City. They go to the county office and fill out the necessary paperwork. They are also told that they must provide a form of surety to protect the county from any liabilities or damages that the taxi cab operator might incur. The taxi cab company goes to a bonding company, who provides the necessary bonds. In this example, the bonding company is the...
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