XL EagleSurety (Surety company)
Surety stands for Surety company. A surety is a company that guarantees your obligations to the project owner. A surety bond involves three parties: you (the principal), the government or owner (the obligee), and the surety that backs your promise.
Unlike insurance, a bond is not meant to cover your losses. If the surety has to pay a claim, you must pay the surety back under an indemnity agreement, which usually includes personal guarantees from owners. For federal bonds, corporate sureties must generally be on the Treasury Department's list of approved sureties, known as Circular 570.
Why it matters to a small contractor
Choose a surety agent who specializes in contractors your size. A good agent helps you understand what the surety wants to see and can find a market for smaller or newer firms.
Example
A small HVAC contractor bidding a federal boiler replacement asks a surety agent for a bid bond. The agent checks that the surety it uses is listed in Treasury Circular 570 before issuing the bond.
Surety: common questions
Is a surety bond the same as insurance?
No. Insurance protects you. A bond protects the owner, and you must repay the surety for any claim it pays.
Can I use an individual surety instead of a company?
Federal rules allow individual sureties in some cases, but they must pledge specific acceptable assets. Most contractors use corporate sureties.
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