Insurance Services

Insurance services are similar to, yet differ from surety bond services in a few ways. They are similar in that a third party is brought into a contract which agrees to make whole the owner in case of default. They are also different. The easiest way to view the difference is that each have different expectations.

What Insurance Services Provide

Insurance is used to protect companies or individuals. If a person has car insurance, it protects them from financial loss if something happens to their car. If the car is in an accident, which is expected to happen at some point, the insurance agency pays the policy holder the equivalent damages to the car. Insurance services are expensive because insurance companies intend to pay policy holders from time to time.

Surety Bond Companies

Surety bond companies, however, do not expect the persons or companies they have bonded to default, or fail to live up to their obligations. When a contractor is bonded, it is assumed he will fulfill all contractual obligations in a job. Surety bonds are relatively inexpensive, often only one or one and a half percent of the estimated job price. If the contractor is bonded and defaults, this can be devastating to the surety bond company.

Surety bond companies, like insurance services, are obligated to indemnify, or make whole, policy owners. In the case of insurance, the insurance company pays the policy holder for losses incurred. Surety bond companies must indemnify the owners. If contractors default, surety bond companies may seek financial indemnity from the contractors.