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

A surety bond and an insurance policy are both types of contracts that guarantee financial protection for the consumer. However, they differ in the type of protection they provide and who is responsible for fulfilling the bond obligation. A surety bond is an agreement between three parties: the obligee, the principal and the surety. The obligee is the party in need of protection and the principal is the party responsible for fulfilling the agreement. The surety is the third party who guarantees the principal will meet the obligations of the bond. If the principal fails to meet the terms of the agreement, the surety is responsible for handling any damages and making sure the obligee is not left at a loss. An insurance policy is an agreement between two parties, the insurer and the insured. The insured pays a premium to the insurer in exchange for financial protection in case of a loss. The insurer is responsible for covering the loss incurred by the insured, up to the limit determined by the policy. In New Mexico, surety bonds are required for certain professions, such as defendant will appear in court when required.">bail bond agents and motor vehicle dealers, in order to protect consumers from any malpractice. Insurance policies are also available to consumers in New Mexico to protect against potential loss.

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

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