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

A surety bond and an insurance policy are both ways to protect against financial losses, however they are distinct types of protection. A surety bond is a three-party agreement between a principal, the obligee, and a surety. The principal is the party who is required to provide the obligation and is typically the contractor. The Obligee is the party to whom the principal must fulfill their obligation and is typically a government agency or municipality. The surety is a third party who ensures that the principal will fulfill the obligation. The surety is responsible for any financial losses that occur because the principal cannot fulfill their obligation. An insurance policy is a two-party agreement between the insured and the insurer. The insured pays a premium in exchange for financial protection from the insurer. The insurer agrees to compensate the insured for any losses that occur from an unforeseen event such as fire, wind, theft, or natural disasters. Insurance policies are often customized to meet the specific needs of the insured, whereas surety bonds are predetermined in the contract. The difference between surety bonds and insurance policies is that the surety agrees to protect the obligee from losses caused by the principal, while the insurer agrees to protect the insured from losses caused by an unforeseen event.

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

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