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Difference between insurance and bonding

By October 11, 2016June 17th, 2019No Comments

Main Differences between Insurance and Bonding

We are often asked what it means to be insured as opposed to being bonded. We have outlined some basic information below to help those interested in obtaining insurance or bonding understand the key differences between the two.

The Contract

Insurance is a form of risk management. It is a two-party contract between the insured and the insurance company. The insurance policy assumes a guaranteed promise that the insured will be compensated by the insurance company in the case of a covered loss.

A surety bond is a contract among at least three parties. It is issued by a surety company on behalf of a second party known as the principal. This contract guarantees that the second party will complete an obligation to a third party known as the obligee.  If the obligation is not met, the third party can recover its losses from that bond.


Insurance is designed to protect the insured from a loss such as an injury to an animal in your care or against third-party bodily injury, i.e. a dog bite.

A surety bond is designed to protect the obligee that has entered into a contract with a second party.

The Premium

Insurance:  The premium paid is designed to cover potential losses the insured may incur.

Surety Bond:  The premium paid is to guarantee the principal fulfills his obligation.


Insurance: Losses are expected and insurance rates are adjusted to cover losses depending on many factors.

Surety Bond: Losses are not expected so surety bonds are issued only to qualified individuals or businesses whose projects require a guarantee.


Insurance:  When a claim is paid the insurance company it is designed to help make the insured whole after a loss has occurred.

Surety Bond:  A surety bond is a form of credit, so the principal is responsible to pay any claims.

If you have any questions or concerns regarding your current coverage please feel free to contact us at 855-367-0470.