First things first, yes, there is a difference between surety bonds vs insurance — several, in fact — and Brunswick Companies is positioned to help you with both. Here are how insurance and surety bonds differ:
What is the difference between surety bonds vs insurance?
Insurance is a form of risk management that functions like a contract between the person or business being insured and the insurance company. The insurance policy guarantees that the insurance company will compensate the insured when a covered loss occurs.
A surety bond is also a contract, but between three parties: the person doing the work (principal), the person requiring the work (obligee), and the surety company providing the bond (surety). The bond guarantees that the principal will fulfill the terms of the contract and, if they don’t, the obligee can file a claim against the bond to recover their losses from the surety.
Who is protected with a surety bond vs insurance?
Insurance protects the business owner, home owner, professional, and more from financial loss when a claim occurs.
Surety bonds protect the obligee who contracted with the principal to perform specific work on a project by reimbursing them when a claim occurs.
How do premiums work for surety bonds vs insurance?
Insurance premiums are designed to cover the potential losses a person or business might incur due to negligent acts, disasters, or other covered events.
Surety bond premiums are designed to guarantee that the principal fulfills his contractual obligations.
How are claims handled for surety bonds vs insurance?
Insurance companies will investigate what happened when a person or business makes a claim against their insurance policy. If the claim is found to be a covered loss as outlined in the policy, the insurance company will reimburse the insured. The insurance company has no expectation of reimbursement for what they pay to the insured for a covered loss claim.
Surety companies will work with the obligee and the principal when a claim is filed against the bond. If the surety concludes that the obligee’s claim is legitimate, the surety will expect the principal to either respond to, resolve, or defend the claim. If the principal fails to do any of those things or does not satisfy the obligee’s claim, then the surety may step in to resolve the situation in one of several ways based on the specific case. The surety company does expect the principal to reimburse them for all expenses incurred during the investigation and settlement of the claim.