What is a defining feature of a surety bond?

A defining feature of a surety bond is that it guarantees performance or completion of an act. This means that when a surety bond is in place, it assures the project owner or obligee that the principal (the party that needs the bond) will fulfill their contractual obligations. If the principal fails to meet these obligations, the surety (the bond issuer) provides financial compensation to the obligee, ensuring that obligations are met or losses are covered.

This guarantee is a fundamental aspect of surety bonds, which are commonly used in construction projects, licensing requirements, and various contractual agreements. Conversely, while some bonds might indeed be involved in short-term projects, they can also apply to long-term commitments, and the bond itself does have an expiration date depending on the terms of the underlying agreement. Additionally, surety bonds do not function to cover theft; that aspect is characteristic of insurance products rather than surety bonds.