Surety Bond: The not-quite-insurance solution.
“A surety bond ensures contract completion in the event of contractor default. A project owner (called an obligee) seeks a contractor (called a principal) to fulfill a contract. The contractor obtains a surety bond from a surety company. If the contractor defaults, the surety company is obligated to find another contractor to complete the contract or compensate the project owner for the financial loss incurred.” ~ Courtesy Small Business Administration
Clear as mud?
In layman’s terms, if you’ve just signed a contract to add an addition to a home just in time for the daughter of the owner’s wedding, and you’re in a serious car wreck the next day and can’t complete it on time… you’re protected against a lawsuit. With a Surety Bond the addition is built on time and you’re protected when you need it.