A corporate surety is a licensed bonding or insurance company that guarantees another party’s obligation for a premium, while an individual surety is a private person who guarantees that same obligation by pledging personal assets. The comparison of corporate surety vs. individual surety matters because the two are funded differently, verified differently, regulated differently, and accepted under different rules, even though federal law recognizes both.1Office of the Law Revision Counsel. 31 USC 9304 For most principals the practical question is which one you can actually get, and for most obligees the question is how much protection sits behind the bond.
The Core Difference
A corporate surety treats bond issuance as its business. You pay a non-refundable premium, typically 1% to 10% of the bond’s face value, and the company’s reserves, portfolio, and reinsurance arrangements stand behind the guarantee. If the principal defaults, the surety pays the obligee and then pursues the principal for reimbursement under a signed indemnity agreement.
An individual surety is a natural person, not a company, partnership, or association. Instead of charging a premium, the individual pledges personal wealth as collateral for the specific bond. Their motivation is usually a financial interest in the project, a family relationship with the principal, or a business arrangement, not a profit margin on the guarantee itself. The obligee is no longer relying on a regulated insurer’s balance sheet; they are relying on one person’s documented assets, and that concentration of risk is what drives every other difference between the two.
How a Corporate Surety Qualifies and Operates
Before a corporate surety can write bonds for the federal government, it must file its articles of incorporation and a sworn statement of assets and liabilities with the Secretary of the Treasury. Treasury will authorize the company only if its articles permit surety activity, it holds at least $250,000 in paid-up capital, and it can demonstrate the ability to carry out its contracts.2Office of the Law Revision Counsel. 31 USC 9305 Approved companies appear on Treasury’s Circular 570, the official listing of sureties qualified to write federal bonds.3Bureau of the Fiscal Service. Surety Bonds
Each approved surety receives an underwriting limit, which caps the penal amount it can write on a single bond. If a bond exceeds that limit, the surety must arrange coinsurance or reinsurance with other approved companies, and the reinsurance amount cannot exceed each reinsurer’s own underwriting limit.4Acquisition.GOV. FAR 28.202 – Acceptability of Corporate Sureties That layering is how corporate sureties back obligations in the tens of millions.
The premium you pay turns on credit, bond amount, bond type, financial statements, and industry experience. Credit score is the single biggest driver. The premium is non-refundable whether or not a claim is ever made.
How an Individual Surety Qualifies on Federal Contracts
For bonds on federal contracts, an individual surety must be a United States citizen when the contract is awarded domestically. If the contracting officer is stationed overseas, the surety must instead be a permanent resident of that country or area.5GSA. Standard Form 28 – Affidavit of Individual Surety The surety completes Standard Form 28, a notarized affidavit detailing personal information, occupation, employer, financial institution, and a full accounting of pledged assets. All signatures must be originals.
The net adjusted value of the unencumbered assets pledged must equal or exceed the full penal amount of the bond. A single individual can support a bond alone if the pledged assets meet that threshold.6eCFR. 48 CFR 28.203-1 – Acceptability of Individual Sureties “Unencumbered” means no existing liens, mortgages, or competing claims. The contracting officer reviews the affidavit, verifies asset eligibility and valuation with Treasury’s collateral operations support team, and then requests that Treasury set up a pledged-asset collateral account to hold the assets for the duration of the bond.
State-level bonds are a different animal. In state court proceedings such as bail, probate, and civil litigation, individual sureties appear under whatever rules the state sets, and the qualification standards can look nothing like the federal regime described here.
What Each Can Pledge as Collateral
This is where many people get tripped up. For federal bonds, individual sureties cannot simply pledge cash, certificates of deposit, or real estate. Under 31 U.S.C. § 9310, the assets must consist of “eligible obligations” described in 31 U.S.C. § 9303(a), which are essentially government securities and other Treasury-approved collateral, and they must be deposited with the government official who accepts the bond.7Office of the Law Revision Counsel. 31 USC 9310 – Individual Sureties
This was a significant change. Before Section 9310 took effect, the FAR allowed individual sureties to pledge real property and required appraisals, title searches, and lien documentation. The statute eliminated that option. The FAR was updated to delete the old provision on acceptance of real property and remove the associated lien-release form, because real property is not an eligible obligation under the statute.8Federal Register. Federal Acquisition Regulation – Individual Sureties If you encounter older guidance suggesting real property works for a federal individual surety bond, that guidance is outdated. State-court individual sureties often still pledge real property, cash, or other tangible assets; the restriction above is federal.
Corporate sureties do not pledge specific assets to the obligee at all. Their obligations are backed by corporate reserves, reinsurance agreements, and diversified portfolios. The obligee on a corporate bond generally does not have to monitor collateral value through the bond’s life, which is a quiet but meaningful difference from relying on an individual surety.
Oversight, Indemnity, and Recourse When Things Go Wrong
Corporate sureties face layered regulation. At the state level, they must be authorized by the insurance commissioner in each jurisdiction where they do business, meet minimum capital requirements, and file periodic financial reports. At the federal level, any surety writing government bonds must file quarterly statements of assets and liabilities with the Secretary of the Treasury. The Secretary can investigate solvency at any time and must revoke authority if the company is insolvent or violates the governing statutes. A surety that fails to pay a final judgment on a bond and has no pending appeal loses the ability to write new bonds after 30 days.2Office of the Law Revision Counsel. 31 USC 9305
Individual sureties face no comparable ongoing regime. No insurance commission monitors their financial health, and no quarterly filings are required. Oversight happens at the point of acceptance: the contracting officer or court reviews the affidavit, verifies the pledged assets, and makes a one-time determination. After that, the accepting authority mainly confirms the pledged collateral remains available and retains its value through the bond’s life.
Behind every corporate bond sits a General Agreement of Indemnity. The GIA requires the principal, and often the owners personally, to reimburse the surety for every dollar it pays out, including attorneys’ fees, investigation costs, and consultant expenses. The surety gets the sole right to decide whether to pay, settle, or fight a claim, and that decision binds the principal. The GIA typically lets the surety demand collateral the moment a claim hits the bond, before the surety has paid anything, and it assigns the principal’s contract funds, equipment, and materials to the surety in a default. The surety is guaranteeing performance; it has no intention of absorbing the loss permanently.
Individual sureties do not typically operate under a GIA. Their exposure is direct. If the principal defaults and the obligee successfully claims against the bond, the pledged assets are at risk without the elaborate contractual recovery machinery corporate sureties build into their agreements. On a federal contract, the obligee’s recourse runs through the pledged-asset collateral account held by Treasury, and liquidation follows Treasury’s collateral program procedures rather than insurance-style claims handling.
Risks Unique to Individual Sureties
Federal agencies can bar an individual from acting as a surety on government procurement bonds entirely. The agency head or designee can initiate exclusion for failing to pay on a bond, failing to disclose existing bond obligations, misrepresenting asset values, submitting false statements on a bond or SF 28, or any other conduct the agency finds compelling enough to warrant exclusion. An excluded individual surety is listed in the System for Award Management, and contracting officers cannot accept bonds from anyone with an active exclusion in SAM unless the agency head provides written justification. The exclusion also prevents the individual from acting as a contractor on government work.9eCFR. 48 CFR 28.203-5 – Exclusion of Individual Sureties
The SF 28 is filed with a federal agency, so a false statement on it falls under 18 U.S.C. § 1001, which covers anyone who knowingly makes a materially false statement in a matter within federal jurisdiction. The penalties reach up to five years in prison plus fines.10Office of the Law Revision Counsel. 18 USC 1001 The form itself warns signers, referencing both Section 1001 and Section 494 of Title 18.5GSA. Standard Form 28 – Affidavit of Individual Surety On the civil side, a fraudulent affidavit supporting a bond on a government contract can trigger False Claims Act liability under 31 U.S.C. §§ 3729–3733, with treble damages plus per-claim civil penalties. For 2026, the inflation-adjusted penalty exceeds $25,000 per false claim.11Federal Register. Annual Civil Monetary Penalties Inflation Adjustment Padding an affidavit is one of the riskier gambles a person can take.
Choosing Between Them on a Federal Project
On federal construction projects, the choice becomes concrete once the Miller Act applies. Any federal construction contract exceeding $100,000 requires the contractor to furnish both a performance bond and a payment bond before the contract is awarded.12Office of the Law Revision Counsel. 40 USC 3131 – Bonds of Contractors of Public Buildings or Public Works Both bonds must have a surety “satisfactory to the officer awarding the contract.”
That language gives the contracting officer discretion. In practice, corporate sureties on Circular 570 are the path of least resistance. Individual sureties are legally permitted, but the eligible-obligation collateral requirement, the asset verification process, and the Treasury coordination make them slower and more cumbersome. For a small contractor who cannot obtain corporate surety credit due to limited financial history or credit issues, an individual surety may be the only way to compete for federal work. For everyone else, a corporate surety is usually both faster to put in place and easier for the obligee to accept.