Florida 2-20 General Lines Agent (Property, Casualty, Commercial Lines and Florida Law)Casualty InsuranceEasy
A surety bond involves three parties. Which of the following parties is the one who promises to fulfill an obligation and is responsible for performing the contract or duty?
- AThe Principal
- BThe Obligee
- CThe Surety
- DThe Beneficiary
Show answer & explanationAnswer & explanation
Correct answer: A. The Principal
In a surety bond, the Principal (also known as the obligor) is the party who has the primary obligation to perform the contract or fulfill the duty and is the one whose performance is guaranteed by the bond.
Why the other options are wrong
- B. The Obligee is the party to whom the promise is made and for whose protection the bond is written.
- C. The Surety is the party who guarantees the performance of the Principal to the Obligee.
- D. The Beneficiary is another term often used for the Obligee in this context, but 'Principal' specifically refers to the party performing the obligation.
Surety Bond Parties - Principal
The Principal (or Obligor) in a surety bond is the party who has the primary obligation to perform a specified act or fulfill a contract.
- The one whose performance is guaranteed.
- Pays the premium for the bond.
- Responsible for indemnifying the surety if a loss occurs.
Memory trick: Surety bonds have a 'P.O.S.' - 'Principal, Obligee, Surety'.