California Property & Casualty Broker-AgentMiscellaneousMedium
An insurance company issues a surety bond for a construction project. In this three-party agreement, which party is the 'obligee'?
- AThe party whose performance is guaranteed.
- BThe independent agent who sold the bond.
- CThe insurance company issuing the bond.
- DThe party for whose benefit the bond is issued (the project owner).
Show answer & explanationAnswer & explanation
Correct answer: D. The party for whose benefit the bond is issued (the project owner).
In a surety bond, the obligee is the party who requires the bond and for whose benefit the guarantee is made. This is typically the project owner or government entity that needs assurance of the principal's performance.
Why the other options are wrong
- A. The party whose performance is guaranteed is the 'principal'.
- B. The agent is an intermediary, not one of the three core parties to the bond.
- C. The insurance company is the 'surety' or 'guarantor'.
Obligee (Surety Bond)
The party in a surety bond who is protected by the bond and to whom the promise of performance is made by the principal and guaranteed by the surety.
- The party requiring the bond.
- The beneficiary of the bond's guarantee.
- Typically the project owner or government entity.
Memory trick: The Principal promises, the Surety secures, the Obligee observes.