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

A surety bond and an insurance policy are two types of financial instruments that are designed to protect individuals and businesses in the event of certain losses. Surety bonds and insurance policies each provide different types of coverage and have different requirements for being issued. A surety bond is a three-party agreement between a principal (the person seeking bond coverage), an obligee (the party receiving the bond coverage) and a surety company (which issues the bond). The surety company agrees to compensate the obligee for any losses caused by the principal if certain terms are violated. Surety bonds are often the requirement for obtaining business licenses in Oregon. An insurance policy provides more extensive coverage than a surety bond. Insurance is a contract between an insurer and insured, with premiums paid to the insurer in exchange for protection from losses caused by covered events or perils. While surety bonds act as a guarantee that a principal will perform certain obligations, insurance policies provide protection for losses caused by unforeseen and uncontrollable events, such as fires or accidents. In summary, surety bonds are a three-party agreement that guarantee performance of certain obligations while insurance policies provide protection from losses caused by certain events. Insurance policies often offer greater coverage and protection than surety bonds, and can be expensive to obtain. It is important to understand the differences between surety bonds and insurance policies to determine which type of coverage is best for your situation.

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

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