Legal Definitions - compensated surety

A compensated surety is a person who is primarily responsible for paying off someone else's debt or fulfilling their obligations. Unlike an insurer, a compensated surety receives payment for assuming liability. This is different from a guarantor, who is only liable to the creditor if the debtor fails to meet their obligations. The compensated surety is directly liable.

For example, if a contractor hires a subcontractor to complete a project, the contractor may require the subcontractor to provide a compensated surety bond. This bond ensures that the subcontractor will fulfill their obligations, and if they fail to do so, the surety will pay for any damages or losses incurred by the contractor.

Another example is when a person is released on bail. The bail bondsman acts as a compensated surety, ensuring that the person will appear in court. If the person fails to appear, the bondsman is responsible for paying the full bail amount.

These examples illustrate how a compensated surety assumes liability and is responsible for fulfilling the obligations of another person.