Most people have heard the term “licensed and bonded,” but how many actually know what it means to be bonded?
While a bond isn’t technically an insurance policy, it is something that we manage as insurance agents. A surety bond is essentially a guarantee that a service will be performed as specified. It is a contract between three parties: the person performing a service (“principal”), the person receiving the service (“obligee”), and the entity guaranteeing that the principal will perform the agreed-upon service (“surety”).
If the principal fails to perform the obligation, the surety pays the obligee; the principal must then reimburse the surety. It ensures that the person receiving the service is not left high and dry.
We’ve made an infographic to help explain: