Surety - What Makes it Different from Insurance?
Published by Alliance Insurance Group on Feb 16, 2015
People need insurance to protect themselves against potential losses. On the other hand, a surety bond is your guarantee that you will fulfill financial responsibilities to your client. The amount of the bond may be paid to your client if you don’t perform specified acts within a stated period. While often underwritten by insurance companies, a surety bond is NOT insurance, it is a line of credit. If there is a claim, it’s paid to your client – and you must ultimately repay that amount. The premium is contract price – a small percentage of the bond’s value that you pay to get the bond. Your client may require a bond before they will work with you. Or a bond may be necessary to obtain a license for the work you do. There are hundreds of different types of surety bonds to cover a wide variety of situations.