What is the difference between an insurance policy and a bond?

The primary difference between an insurance policy and a bond in New Hampshire is the purpose of each. An insurance policy is a contract between an insurer and an insured that requires the insurer to pay out a certain amount of money in the event of certain risks, losses, or damages. These risks, losses, or damages must be specified in the policy. A bond, on the other hand, is a form of guarantee, or promise, made by one party, known as the surety, to another party, known as the obligee, that a specified obligation will be fulfilled. Therefore, an insurance policy is an agreement outlining certain risks, losses, or damages that an insurer is required to pay in the event of them occurring, while a bond is a guarantee made by one party that a certain obligation will be fulfilled. In New Hampshire, the main purpose of an insurance policy is to provide financial protection against certain risks that may be too large or too uncertain for an individual or organization to bear alone. Bonding, however, exists primarily to guarantee performance of a contract, the payment of debts, or the fulfillment of obligations. Insurance policies also tend to be more comprehensive as they typically cover more than one risk, as well as losses or damages caused by those risks. Bond contracts are typically more limited in scope and cover only one specific risk.

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