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Surety bond
Published 2026-06-12 · by Brokly
In plain terms: A three-way guarantee: a surety company promises your customer or the state that you'll meet an obligation — and if you don't, the surety pays them and then collects from you.
Why it matters to you
A bond is not insurance for you. Insurance protects you when things go wrong; a bond protects the other party from you, and you repay the surety for anything it pays out. Knowing the difference keeps you from thinking "bonded" means "covered."
Where you’ll see it
Licensing boards require bonds to issue contractor licenses in many places; project owners require performance bonds on bigger jobs. "Licensed, bonded, and insured" in an ad is naming three different things.
Related terms
Definitions describe how policies are typically structured — exact terms live in the policy. Not legal or compliance advice.
Sources: NAIC — Glossary of Insurance Terms (Surety Bond) (retrieved 2026-06-12)