What does Bond Insurance Cover?
Bond insurance covers a whole host of items. It should be understood that a surety bond is not really insurance. Instead, it is a three party agreement where a large insurance company (or another company) provide a guarantee on behalf of another company. This guarantee is known as a surety bond.
In general, what happens in a normal situation is that one party needs a surety bond for a job, such as a general contractor on a federal work site. Under the Miller Act, the general contract is required to have this performance bond. So, they will contact a surety bond company. The surety performance bond will be written so that the surety will provide assurance to the government (known as the Obligee) that the general contractor (the Obligor) will perform, or else the surety will find another company to perform on its behalf.