A surety company is a specialized financial institution that provides guarantees to ensure that a party fulfills its obligations, typically in contracts. When a contractor bids on a project, they may need to obtain a surety bond from a surety company, which assures the project owner that the contractor will complete the work as agreed. If the contractor fails to meet their obligations, the surety company steps in to cover the financial loss, up to the bond amount. This process helps protect project owners and ensures that contractors are held accountable for their commitments, fostering trust in the construction industry and other sectors.