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A surety bond (pronounced "shur-i-tee bond") can be defined in its simplest form as a written agreement to guarantee compliance, payment, or performance of an act. Surety is a unique type of insurance because it involves a three-party agreement. The three parties in a surety agreement are:
The principal is an individual, business or other party that purchases the surety bond and agrees to undertake a compliance, payment or performance obligation as promised pursuant to the terms of the surety bond form or agreement.
The surety is the insurance company or surety company that guarantees the obligation will be performed. If the principal fails to perform the act as promised, the surety is contractually liable for losses sustained.
The obligee (pronounced ob-li-jee) is the party who requires and often times receives the benefit of the surety bond. For most surety bonds, the obligee is a local, state or federal government organization.
Find out how to get a dealer’s license in Texas and start selling automobiles in the Lone Star State, including how to get the surety bond you need.
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