A surety bond is a three-party agreement where the surety (typically an insurance company) agrees to be responsible for the debt, default, or failure of the principal (the party performing an obligation or service) to the obligee (the party to whom the obligation is owed). In simpler terms, it’s a form of financial guarantee that ensures one party will fulfill their obligations to another party. If the principal fails to meet their obligations, the surety steps in to fulfill them or compensate the obligee for losses incurred. These bonds are commonly used in various industries, including construction, government contracts, and finance, to provide assurance that contractual obligations will be met.