What is the primary function of a Surety Bond?

The primary function of a Surety Bond is to ensure the performance of a contract. A Surety Bond is a legally binding agreement among three parties: the principal, who is required to perform a specific obligation; the obligee, who is the party that requires the bond and is protected by it; and the surety, who provides the bond and guarantees the principal's performance.

If the principal fails to fulfill the obligations specified in the contract, the surety is responsible for compensating the obligee for the financial loss caused by that failure, up to the bond amount. This assurance gives the obligee peace of mind, knowing that the project or contract will be completed satisfactorily and that they have financial recourse in case of non-performance.

Other options are incorrect as they describe different types of coverage or guarantees not associated with the primary purpose of Surety Bonds. For instance, guaranteeing employee fidelity relates to fidelity bonds, while covering general liabilities pertains to liability insurance. On the other hand, providing health insurance coverage is entirely outside the scope of what a Surety Bond addresses in terms of contract performance and obligations.