difference between surety bond and insurance

Surety bonds are confusing. Don’t believe me? Ask the person next to you “What is a surety bond?”

While surety bonds are often misunderstood to be insurance policies, they are not. While there are similarities, there are differences too. Here are 5 differences between surety bonds and insurance. 

Short on time? Read our Surety Bond Frequently Asked Questions.


Surety Bond vs Insurance

Difference #1: Number of Parties Involved

Surety bonds involve 3 people:

  • The Obligee – the person who is protected by the bond
  • The Principal – the person who gets the bond
  • The Surety – the person who issues/supplies the bond

Insurance policies involve 2 people:

  • The Insured – the person who is protected by the insurance policy
  • The Insurer – the person who provides the insurance policy

Difference #2: How They Work (Surety Vs Insurance)

How surety bonds work:

How insurance works:


Difference #3: Losses

  • Surety bonds are not expected to incur losses. Losses are rare and must be fully paid back by the Principals. Because of this, surety bonds are only issued to individuals who are qualified. 
  • Insurance comes with expected losses. The insurance company knows this and pools the risk with the law of large numbers so that the risk is shared. 

Learn more about this difference.

Difference #4: Premium Paid

How surety bond premium works:

  • The premium paid for a surety bond is for the guarantee that the Principal follows through with their obligation or promise.
  • Premium is paid one time. Premium does not need to be paid again until the bond needs to be renewed (generally one year later).

How insurance premium works:

  • The premium paid for an insurance policy is designed to cover any losses that might happen.
  • Premium is often paid on a monthly basis.

Curious what you would pay for a surety bond? Get a free quote below. 

Get free Surety Bond quotes

Difference #5: Repayment of Claims

  • Surety bond claims: When a surety bond claim is paid, the surety company pays the claim. Because of the nature of surety bonds, the surety company requires you to repay every single penny.
  • Insurance claims: When an insurance claim is paid, the insurance company pays the claim. They do not expect to be repaid by the Insured, nor is it required.


You can learn more about the surety bond claim process.

Do You Need a Surety Bond?

If you need a surety bond, Surety Solutions can help. We understand the differences between surety bonds and insurance and can help you get the correct bond that you need. 

We’ve been giving out free surety bond quotes since 2004. Get yours by visiting our online quote portal or by clicking below.

See how much you’ll pay for your Surety Bond


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