How do Surety Bonds differ from Insurance?

Category: Uncategorized
Published: Jan 8, 2009
With insurance, a person is required to pay an insurance premium to their insurance company which essentially transfers most (if not all) risk from the individual purchasing the insurance to the insurance company.  The only similarity between insurance and a surety bond is the payment of a premium, because when a person pays a bond premium for a surety bond they (the principal) do not transfer risk to the surety, and instead, the payment of claims will fall on the principal’s shoulders.  When dealing with surety bonds, the protection goes to the person or entity that requires the principal to purchase the bond (the obligee).

When dealing with losses, insurance companies typically expect to make payment for a certain percentage of a given claim.  However, surety companies do not expect to make such payments on claims, and instead treat the premiums paid for surety bonds as service charges.  The premiums essentially authorize the principal to use the surety’s deep pockets for financial backing, which provide the required guarantee.

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Robin Kix

Robin Kix is currently the Renewal Department Manager. Since joining Lance Surety in 2014, she has helped thousands of businesses throughout the nation remain compliant at the federal, state and local level. She has significant experience supporting commercial bond lines, particularly in the automobile, transportation and construction industries. Robin and her team work together to create a positive customer service experience at the time of every policy renewal, whether that be finding the best pricing or offering additional assistance.