Surety insurance is a type of contract that provides a guarantee that a specific obligation will be fulfilled. It typically involves three parties: the principal, who needs the bond; the obligee, who requires the bond; and the surety, which is the insurance company that backs the bond. If the principal fails to meet their obligations, the surety will compensate the obligee, ensuring that the project or contract is completed. This insurance is commonly used in construction projects, where contractors must provide surety bonds to guarantee their work. It helps protect the interests of the obligee, ensuring that they are financially covered in case of non-performance or default by the principal.