Surety Bond
A financial guarantee that a contractor will fulfill their obligations.
Definition
A surety bond is a three-party agreement in which a bonding company guarantees that a contractor (the principal) will perform a contract as agreed; if they don't, the bond pays the customer up to its face value.
In plain English
Many states require licensed contractors to post a bond ($5K–$50K typical). Different from insurance — the contractor must repay the bonding company if the bond pays out.
Example
A contractor abandons a $12K bathroom remodel → the homeowner files a claim against the contractor's $15K surety bond.
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