A surety bond is a legally binding contract between three parties:
Principal: The party that purchases the surety bond to guarantee its obligation. In this case, the private school is the principal. (“Principal” is a bond term and has nothing to do with the position of a school principal.)
Obligee: The party that requires the institution to buy a surety bond. In this case, the obligee is the state government agency that regulates private education.
Surety: The insurance company that writes the surety bond and provides a financial guarantee.
The bond guarantees that the educational institution will comply with the terms established therein. If the principal causes another party financial injury by breaking the terms of the bond, the surety will guarantee the principal’s obligation and pay the injured party if the principal will not or cannot. However, the principal must reimburse the surety fully for any claims that the surety pays out.
What's a surety bond?
It's what teachers need in order to be able to teach... Kind of like malpractice insurance...
A surety bond is a legally binding contract between three parties:
Principal: The party that purchases the surety bond to guarantee its obligation. In this case, the private school is the principal. (“Principal” is a bond term and has nothing to do with the position of a school principal.)
Obligee: The party that requires the institution to buy a surety bond. In this case, the obligee is the state government agency that regulates private education.
Surety: The insurance company that writes the surety bond and provides a financial guarantee.
The bond guarantees that the educational institution will comply with the terms established therein. If the principal causes another party financial injury by breaking the terms of the bond, the surety will guarantee the principal’s obligation and pay the injured party if the principal will not or cannot. However, the principal must reimburse the surety fully for any claims that the surety pays out.