Who typically purchases a surety bond?

The principal is the party that purchases a surety bond, establishing a financial guarantee to fulfill a particular obligation, such as completing a construction project or adhering to a contract. The principal provides this financial security to protect the obligee, who is the entity requiring the bond, and ensures that they can fulfill their responsibilities as outlined in the agreement.

In this context, the obligee serves as the beneficiary of the bond, ensuring that they are compensated if the principal fails to meet their contractual obligations. The surety, on the other hand, is the company that underwrites the bond and provides the guarantee. The contractor's employees do not have a role in purchasing the bond; their relationship is more about the services they provide under the contractor’s agreements.

Understanding the roles of these parties highlights why the principal is the one who purchases the surety bond, as they are the ones obligated to fulfill the contract or condition that necessitates the bond.