Short answer
The surety investigates the claim. If it is valid, the surety pays the obligee up to the bond amount, and you reimburse the surety for what it paid plus any costs. A bond is a guarantee, not coverage that absorbs the loss, so the financial responsibility ultimately returns to you, the principal.
When an obligee files a claim, the surety reviews whether you actually failed to meet the bonded obligation. Invalid or disputed claims can be contested. If the claim is valid, the surety pays to protect the Obligee, then looks to you for repayment under the Indemnity agreement you signed when the bond was issued.
Repeated or unresolved claims can affect your ability to renew or obtain new bonds, which is why addressing the underlying issue quickly matters as much as the payment itself.
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