Surety bonds and insurance policies sound a lot alike, but they’re actually quite different:
Surety Bond – Bond agreements are between the obligee (the entity that requires the bond), the principal (you), and the surety (the bond company).
Insurance Policy – Insurance agreements are only between you and the insurance company.
Surety Bond – The obligee (often a state government) is protected because the surety agrees to pay if the principal does not.
Insurance Policy – You are protected because the insurance company agrees to pay if you file a claim on your policy.
Surety Bond – You are financially responsible for any claims made against your bond. If the surety company pays initially they will attempt to collect the sum from you.
Insurance Policy – The insurance company covers all or most of the cost of the claim beyond what you pay as a deductible.
Surety Bonds – The cost is calculated based on the size and type of the bond as well as the credit history of the principle.
Insurance Policy – The cost is calculated based on the value of the asset being insured (eg car, house) and your estimated risk of filing a claim.
Which Do You Need?
Many businesses are required by their state government to obtain both surety bonds and insurance policies. Investigate how the laws apply to your business. Then contact Viking Bond to find the exact surety bonds you need to fulfill the state obligation.