Surety

What Does Surety Mean?

A surety is an individual or organization that assumes the responsibility of repaying a debt if the debtor defaults or is unable to repay it. It is also referred to as a guarantor.

Insuranceopedia Explains Surety

The need for a surety arises in contracts where one party has concerns about the other party’s ability to fulfill their obligations and meet specified requirements. In such cases, the first party typically seeks assurance, often in the form of a surety, to mitigate risk. The guarantor enters into a contract of suretyship, which may provide additional benefits, such as lower interest rates for the borrower.

Surety arrangements come up most often in business contracts, which is why independent contractors and other service providers are frequently asked to post a surety bond before starting a project. A surety bond is separate from standard business coverage, so contractors typically pair it with a general liability insurance policy to handle the claims they are actually liable for.