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

A surety bond and an insurance policy are both forms of financial protection for certain risks. They both protect a person or a business from financial loss due to a certain event. However, they have some key differences. A surety bond is a three-party agreement between the obligee (the person who is protected), the principal (who is the party who needs to get the bond) and the surety (the entity that provides the bond). The obligee is the one that requires a surety bond when they have a financial interest in the assurance of certain obligations. For example, in New Jersey, surety bonds are typically required to protect the public consumer from loss due to fraudulent or dishonest acts of a business. On the other hand, an insurance policy is a contract between the insured (the person who pays for the insurance) and the insurer (the company providing the insurance). The insured pays premiums to the insurer, and the insurer agrees to provide coverage for certain losses (as specified in the policy). The insurer will pay out a claim if the insured experiences the type of loss specified in the policy. This would be done if, for example, an insured person were to file a claim for a car accident or for a fire damage. In conclusion, a surety bond is a three-party agreement between an obligee, a principal, and a surety. An insurance policy is a contract between an insured person and an insurance company. The insured pays premium in exchange for coverage in case of certain losses.

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

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