Surety bonds are a hot topic among service providers and service-based industries… but what’s it really all about? What is a surety bond, and why are they important?
The subject has become even more popular when a law was passed recently requiring certain medical providers and suppliers to have a medicare surety bond in place by October of 2009.
A surety bond, in it simplest definition, is a contract among three parties:
The Principal – The primary party who will be providing a service or performing a contractual obligation
The Obligee – The party who will receive the services to be provided, typically a consumer
The Surety – The organization who guarantees that the prinicipal’s responsibilities according to the contract will be performed as agreed upon
In a basic, easily understood explanation, that’s the essence of a surety bond.
