Every surety bond involves three parties. The principal is you — the business or individual required to get bonded. The obligee is the government agency or entity that requires the bond and is protected by it. The surety is the company that backs the bond and guarantees your performance.
When you buy a bond, the surety is vouching for you. If a valid claim is filed by the obligee, the surety investigates and may pay the claim, then collects reimbursement from you. That is why approval depends on your financial profile.
The principal
The principal is the party required to obtain the bond — typically a business owner, contractor, or licensed professional. As the principal, you promise to perform your duties honestly and follow the laws that govern your license.
The obligee
The obligee is the party that requires the bond and is protected by it — usually a government agency, licensing board, or court. The obligee can file a claim against the bond if you fail to meet your obligations.
The surety
The surety is the company that issues the bond and guarantees your performance to the obligee. If a valid claim is paid, the surety covers it up front and then seeks reimbursement from you. This is why the surety reviews your credit and financial standing before approving the bond.