Is Surety Bond an Insurance Policy?

Typically, an insurance company or bonding agency, issues the surety bonds and pays out a penal sum or a predestined, maximum amount of each claim filed. The money for a valid customer claim, comes from the principal, which was collected by the surety, in the form of a bond premium. However, a surety bond, is not an insurance policy, but rather a credit extended to the principal.

Many state governments require companies to be bonded, in order to be allowed to do business, within their jurisdiction. Furthermore, surety bonds are affordable, do not require collateral and as such, can provide an additional financial cushion to companies that may be cash strapped or have limited capital resources. To learn more about Surety Bonds, go to: