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What is the difference between surety bonds vs insurance?
Insurance is a form of risk management that functions like a contract between the person or business being insured and the insurance company.
The insurance policy guarantees that the insurance company will compensate the insured when a covered loss occurs.
A surety bond is also a contract, but between three parties: the person doing the work (principal), the person requiring the work (obligee), and the surety company providing the bond (surety).
The bond guarantees that the principal will fulfill the terms of the contract and, if they don’t, the obligee can file a claim against the bond to recover their losses from the surety.
Who is protected with a surety bond vs insurance?
Insurance protects the insured: business owner, home owner, professional, etc. from financial loss when a claim occurs.
Surety bonds protect the person requiring the work, who contracted with the principal to perform specific work on a project, by reimbursing them when a claim occurs.
How do premiums work for surety bonds vs insurance?
Insurance premiums are designed to cover the potential losses a person or business might incur due to negligent acts, disasters, or other covered events.
Surety bond premiums are designed to guarantee that the principal fulfills his contractual obligations.
